The global diamond industry has been passing through a 'Transformation Stage' since the severe economic recession hit it in 2008. The diamond prices too have become highly volatile since then, and are expected to grow at an accelerated rate over the 10 years. This is because of the rapidly growing demand from swelling middle classes in India and China, and the inability of existing and newer diamond mines to fulfill global demand. It is only natural for consumers to look for some cheaper but equally attractive and elegant alternatives when the existing ones become costly and go out of their reach. This 'Transformation Stage' has been noted in India where consumers have started showing interest in synthetic diamonds, which provide a cheaper, but 'equally good' option over the natural ones. It has been observed that the demand for synthetic diamonds is on the rise in India, with the attractive artificial stones having captured 1% of the country's overall diamond jewellery market, where branded jewellery accounts for 7%. Mr. Vipul Shah, Chairman of India's Gem & Jewellery Export Promotion Council (GJEPC) says, "At present, the Indian gold and diamond jewellery market is estimated at INR 3 lakh crore. The synthetic diamond market has grown to INR 3,000 crore in the last two decades. Synthetic diamonds were introduced two decades ago in India to offer an alternative to the price-sensitive customers. Since then, its market has been growing at a compounded annual growth rate of 25%."
Will this 1% become the majority? A sustained economic recession in developed countries, sluggishness in the growth of the middle classes in developing countries, growing European debt crisis and the unclear economic outlook in the US can slow down demand growth for natural diamonds. At the same time, aggressive commercial growth of synthetic diamonds following the increased consumer demand could adversely impact prices for genuine diamonds. So the 'Transformation' seems to be on the move. In an independent research conducted 10 years ago revealed that majority of consumers wanted the real thing and were not prepared to settle for anything less. However, But the above facts have been contradicted in a research carried out two years ago by De Beers says that demand for synthetic diamonds has been growing. The survey claimed that the number of women who preferred natural diamonds had dropped to 52% as compared to 96% of women who fancied the same stones 10 years earlier. One of the reasons behind this shift is that some consumers do not want to promote the selling of the so-called blood diamonds. Moreover, synthetic diamonds are 30 to 40% cheaper, owing to its cost-effective nature of manufacturing. These diamonds are considered as 'green' and 'conflict-free'. So, would synthetic diamonds pose any threat to the growth of natural ones? "Synthetics being the smaller market, presently, there is no threat. But if it continues to grow at current rate, it would be a great threat for the diamond jewellery industry in India," says Mr. Shah. But Mr. Eli Izhakoff, President of the World Diamond Council (WDC) holds slightly different view. In an interview with Rough & Polished, he says, "In principle, I do not see synthetic diamonds as threatening the market for natural stones, as long as the industry is consistent about marketing them as different products. Each has its place in the mix, and each is legitimate. But the consumer must understand that a natural diamond is not a synthetic diamond and vice versa. Let us remember, products like cubic zirconia and moissanite were developed as diamond alternatives. Neither has disappeared, but they also have not threatened the natural diamond market. Synthetic diamonds, if handled correctly, should behave in the same way." It may be a fact today that the synthetic diamonds have captured only 1% of the India's overall diamond jewellery market but one thing is certain that a big vacuum in form of inconsistent supply of natural diamonds at a competitive price could be created in near future which may prove decisive in favour of the synthetic diamonds.
