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The Case of the Price Plummet

A lab-grown diamond subsidiary of a mined diamond conglomerate was offering them for one-third of the price.

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OLIVIA BRINDLE, THIRD-GENERATION owner of Brindle’s Diamonds, had serious reservations about selling lab-grown diamonds in her family’s store. She was concerned about the possibility of confusion on the part of her team and her customers and was worried about the potential long-term damage to her store’s impeccable reputation. Olivia held out through the initial surge of the product in the market, shifted to a “we’ll bring them in for customers upon request” position in early 2020, then was finally convinced a year later that offering her customers a legitimate option to buy what they wanted from Brindle’s instead of having to go to her competition, regardless of her personal view, was the only responsible business decision.

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual jewelry businesses and people.

ABOUT THE AUTHOR

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at [email protected]

After consulting with industry colleagues who had been successful with the product, Olivia decided to go with a well-known supplier who had a major presence within her buying group. The vendor offered very reasonable terms, a substantial memo-to-buy ratio, plenty of digital and in-store marketing collateral, and most important to Olivia, they provided extensive on-site and online product knowledge and sales training for her team. While she wasn’t crazy about some of the selling techniques and product descriptions promoted by the company, Olivia had to admit that having lab-grown diamonds in the store was clearly contributing to Brindle’s significant sales increase.

In mid-October of 2021, Max Browne, a longstanding Brindle’s customer, came into the store shopping for a 2-carat diamond in a pendant for his wife. Much to Olivia’s discomfort, Sam Aron, her top seller, approached the sale as recommended in the lab-grown training by asking, “Are you looking for a mined diamond or a lab-grown diamond?”, and the approach opened a conversation Max hadn’t even considered. After hearing Sam repeat all of the key talking points for lab-grown (precisely as he’d heard them in the vendor’s training presentation), Max was convinced that getting “exactly the same thing” for a lot less money with a diamond grown “above ground” instead of “below ground” was probably not a bad idea. He chose a 2.01 round, H, VS1, well cut stone that was to be set in a simple four-prong pendant mounting for a total of $6,850. He planned to pick his gift up in late November.

Excited about his new purchase, Max decided to read up on the whole lab-grown process. His Google search provided him with a number of informative websites. For some time after his search, he continued to see ads from a variety of lab-grown sellers pop up on his screen, but he rarely paid them any attention, since most showed prices close to what he paid, and he really did trust Sam and Brindle’s.

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Then, just a few days before he was supposed to pick up his pendant, Max saw an ad come up from a company advertising a 2-carat lab-grown diamond pendant for $1,999 and citing “transparent pricing.” His curiosity got the better of him, and he clicked on the ad. The company was a lab-grown diamond subsidiary of a diamond mining conglomerate, and the information provided on their website was fascinating. Some of it was similar to what Sam had told him, but they seemed to offer a lot more detail about the differences between natural diamonds and lab-grown diamonds, and all of the information seemed objective and reliable. His anxiety began to rise as he realized that the company was offering him exactly the same thing as what he purchased from Brindle’s for less than one-third of the price. He was surprised to see that in addition to being sold online, this line of lab-grown diamonds was also sold in well-known and respected stores, including one just 40 miles from his home. To add insult to injury, after registering with the site, he received a coupon code for an additional 15 percent discount. Relying on the legitimacy of the full refund policy offered by the company, he placed an order that evening and received his 2-carat pendant three days later.

Max took the pendant with him to Brindle’s and asked to see the one he was supposed to be picking up. When he asked Sam what he knew about the lab-grown diamond line, Sam was quick to suggest that their quality was questionable and to point out that the company didn’t even offer certification on their stones. Sam was shocked when Max pulled the pendant out of his pocket and compared it to the one the store had sold him. The fact was that the company’s pendant looked brighter and better than the one that was three times the price. Sam had no good explanation for his errant report on the brand’s quality or for the price difference.

Max demanded a refund and asked to speak to Olivia. He calmly asked why she would even consider taking advantage of her customers by overpricing what was clearly a commodity product, and how she could allow her salesman to tell half-truths about the value of what he was selling. He even went so far as to question the real value of the mined diamonds he’d bought from the store over the years.

The Big Questions

  • Is there any way for Olivia to reclaim her store’s credibility with Max?
  • Should Brindle’s continue to sell lab-grown diamonds?
  • Knowing that Max will most certainly put the word out about his experience, should Olivia craft some sort of outreach to other customers who bought lab-grown diamonds from Brindle’s? If so, what should she say?
Mark S.
Albuquerque, NM

The store owner should have signed up with a company like Lightbox that offers low prices for its 2-carat lab diamonds. It appears she took it for granted all lab diamond suppliers are pricing the lab goods the same (rookie mistake) and/or took a high markup. The shop owner is completely responsible for the customer’s chagrin. Get over it … it happens.

Kenneth G.
Atlanta, GA

This has been a concern to me since lab-grown diamonds were first marketed. As the process of growing diamonds becomes more cost efficient, and as more companies around the world keep producing larger and larger quantities, the prices will drop and those who bought early will have a depreciating asset. Not exactly what one thinks of in regards to diamonds. This scenario is similar to the Chinese (rice) pearls of years ago. It was a race to the bottom. In time, as the market becomes flooded with lab diamonds, they will be like the cheap synthetic rubies and sapphires and reconstituted stones in the chain stores and malls. They will have their place and perhaps one day replace CZs. The truly fine jewelry stores should draw a line, just like most do, in not handling 10K gold or low-quality goods. Rarity has value. If this store would have talked about the rarity and uniqueness of each diamond and the timeless value of owning the real thing, this situation could have been avoided.

Jeremy A.
Los Angeles, CA

No store should compete solely on price! Think about what else can the store offer: warranty, ring design, services such as sizing, cleaning, etc. You can’t win ’em all and don’t let it get you down. If you do a good job educating your customers, providing them with great options and services, you will have a thriving business. It didn’t work out with this customer, so take the ring back, tell them they got a great deal and wish them well. Tell them to come back for wedding bands, anniversary and birthday gifts. Don’t underestimate how scary it is to purchase a diamond blindly online. You’re the expert — be confident in your abilities and know that you’re doing your best to select excellent options for your clients. This client may have found the needle in the haystack, but he’s the exception to the rule.

Natalya J.
Seattle, WA

I think the biggest mistake was Sam immediately suggesting the product of the competition was poor, as it opens the conversation for Max to use the same talking points against Brindle’s instead. Suggesting your product is superior due to another’s inferiority is just bad sales. In this case, Olivia needs to take over the sale and price-match the competing stone, if not offer a better one at the same price. It’s easy to explain away market volatility if the client is happy with the product and the price. Oliva and the staff need to rework their lab grown approach. They know their community and their clients; the supplier, and in turn, their sales training, does not. This supplier is obviously also overpriced, so she should consider working with other suppliers or slimming margins considerably if they want to compete in the lab-grown market. As sales pitches should always mention the uncertainty of lab-growns holding their value, there is no reason to reach out to old customers.

Tracy A.
Green Bay, WI

Olivia should have stuck with her gut instinct: not to sell lab-created diamonds. There will never be a happy ending!

Frank J.
Hoover, AL

Lab-grown diamonds are here to stay just like moissanite and CZ previously. The sooner one accepts that reality and adopts policies necessary to capitalize on their sale, the better off you’ll be. Educate yourself on the lab-grown market just like you keep up with the mined diamond and precious metals markets. I can’t imagine what else you could do other than bury your head in the sand.

Stacey H.
Lincolnwood, IL

Lab-grown may be a big part of the market right now, but I’m completely convinced that they are an open elevator shaft to the ground floor from the top of the building. Even pawn shops won’t buy them because the cost keeps dropping. I recently saw an ad post on Facebook offering “who wants lab-grown at 90 back?” This might stabilize at some point, but why would anyone risk their good name to chase a few dollars circling the drain? No thanks! Real diamonds come from the ground and support actual working people in Africa. Lab-grown? Rows of huge indifferent machines sucking up unholy amounts of power off the grid. No comparison. Give me real natural FROM THE EARTH diamonds every time! Lab-grown? FEH!

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Ess M.
Lynn, MA

Brindle’s should also explain to the customer the cost of doing business. Anyone can purchase a lab-created stone from anywhere. If the customer wants a creditable jeweler that will set his stone professionally and stand behind their artistry, then Brindle’s would be the place to go. Brindle’s should also ensure the customer that they only handle gems that they purchase, not from a secondary source. If the customer wants the stone set by the company he purchased the stone from and stand by his product, then he should go there. It is hardly worth the back and forth. Brindle’s probably should state a stronger policy to start with. Cost of business — time, tools, materials, quality and warranty is what Brindle’s should be about.

Peter T.
Show Low, AZ

The lab-grown diamond market hasn’t really stabilized yet. Prices are all over the board right now. But if the customer could find a diamond for a third of the retail price, the store got greedy and overpriced the stone. It is unlikely she would keep Max as a customer. If she wants to try, she should admit the diamond was incorrectly priced, offer a full refund (or a two-thirds refund if the customer wants to keep the stone). There’s no reason not to sell lab-grown, but Olive should teach the staff not to push them as “just as good” as a natural diamond. Olive also should shop better for good prices on her merchandise — that is part of why a customer would shop her store in the first place.

Jim S.
Kauai, HI

Herein lies the big issue with lab-grown stones (diamond or others). As the ability to produce less expensively improves, the cost must come down. We offer natural items with real value that holds up over time. What will the price be for a lab-grown stone in four or five years, and how will your customer feel about their purchase then?

Marcus M.
Midland, TX

Get them out! Get that garbage out of your store. See, here’s the problem … every Tom, Dick and Harry is trying to capitalize on this ridiculous lab-grown trend, and anyone can buy these anywhere. Everyone offers the cheapest prices and the gimmicks are rampant. No surprise a brick-and-mortar got burned and no surprise another uninformed/misinformed consumer turned to the internet to compare. Retail is hard enough these days, and differentiating yourself is key to survival. Olivia should give Max a brief explanation of her pricing structure and stand behind the quality of merchandise her store represents (minus the lab-grown junk). Inform him that just about every day, another lab-grown company pops up and sells them for less. It’s a losing game. Not sure how you save face with Max, but I wouldn’t worry too much about it. I’d have a game plan ready for others who might come forward about the lab-grown you sold them, and then I would dump the product like a bad habit.

Joel M.
Conway, AR

There is not even enough information here to come up with an answer. There are so many variables in the lab diamond world. Is it HPHT or CVD? Is the diamond from the other company enhanced? Why won’t the other company provide a diamond report? I would bring up all of these issues with the customer. I would ask to see all the documentation from the other pendant and try to identify exactly what the customer purchased.

Don B.
Roswell, NM

This case clearly shows that lab diamonds are the same as natural. Frustrating that wholesalers are selling direct to our customers on either side of the issue. Most anything can be found online for a fraction of what it is sold for in a store front. Yet, Tiffany’s can sell a silver charm for $300-plus and is doing quite well.

Eric C.
Taylor, MI

Understanding this is a unique situation, the store should offer a refund to keep a good rapport with the customer. In the future, the store should be aware of online competitors and be prepared to handle objections like this. Moreover, the store should find a competitive supplier of lab-grown diamonds.

Ralph H.
Connersville, IN

Where to start? These problems have been rife in the industry forever. Cubic zirconia advertised as “near diamond.” SI3 developed to appease a certain lab’s customers (hey, either you see it or you don’t). Now lab-grown diamonds at prices declining like water over Niagara Falls. If we can sort through the mess, lab-grown diamonds offer a real bargain to the customer and a legitimate profit source for merchants. How about this: Natural diamonds can be distinguished from labs. As long as this is the case, naturals will be more rare and more valuable. Labs always give customers a real price savings, and so far as we know are virtually identical to naturals, physically and chemically. Always have your gemologist examine diamonds, especially labs. Use multiple known sources; be sure you have the best “deal” available. These folks got caught in the brawl between retail and internet; not entirely their fault. Give the guy a refund or find a better stone from another source. All the customer sees now is price. Good luck with it.

Troy L.
Irvine, CA

Max come check this out. Show him the pricing on Blue Nile for a natural 2.00-carat-plus H VS1, all graded by GIA ranges for $21K-40K. That is a huge range, and one’s opinion online is always how much, not how beautiful. So it is easy to go for price without understanding why the significant range. This is where a gemologist and experienced buyer comes in place. Though the one you purchased is not graded by any company, so the price savings comes in the trust you put in them that they delivered what is promised and not a diamond-coated CZ or a more brilliant moissianite.

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Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at [email protected].

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