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De Beers undercuts the man made diamond price

Discussion in 'RockyTalky' started by Garry H (Cut Nut), May 29, 2018.

  1. Garry H (Cut Nut)
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    by Garry H (Cut Nut) » May 29, 2018
    http://octonus.com/oct/projects/letter_to_editor2.phtml
    Is an article we wrote 10 years ago. De Beers has finally done as good patent readers knew they would.
    It will be front page news.
    All the shonky outfits touting conflict free and save the environment "buy a diamond for half price" are dead in the water.
    I welcome the creation of a new and binafide market. An intro market to the big game
     
  2. Miki Moto
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  3. Texas Leaguer
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    by Texas Leaguer » May 29, 2018
    I welcome the move. Debeers is being pre-emptive here and helping (like no other company could) to re-frame the narrative about the value proposition and proper positioning of man made diamonds in the market.
     
  4. Miki Moto
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    by Miki Moto » May 29, 2018
    It's a smart move... so now it's Swarovski Crystal vs. MMD and not mined diamonds vs. MMD. DeBeers just made crystals the competition for MMDs. Wait until other colors start coming out and I assume they will do that soon... lavendar, mint green, pale yellow... my thoughts are once that happens, it will completely devalue MMD for engagement rings as consumers will see it like colored crystals.
     
  5. metall
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    by metall » May 29, 2018
    I read about the new lightbox line debeers was planning on putting out just this morning. I think it's an interesting but not unexpected turn around for debeers.

    But it is good that MMDs will now have a set standard to go by!
     
  6. KingKuda
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    by KingKuda » May 29, 2018
    He's done this purely to defend his own power and position in the mined diamond world.

    Those people who paid $12k for a 1.5ct man made diamond a year ago, will now be kicking themselves knowing that they could have had a 1ct alternative for $800.

    Interesting move, but I don't know how I feel about it. I really worry that in 10 years time we will see every lady walking around with a 2ct stone on her finger, that to the naked eye looks amazing, though she only had to spend $500 on it.

    I'd have preferred they jacked the prices right up, on par with real diamonds, and played it that way instead.
     
  7. Miki Moto
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    by Miki Moto » May 29, 2018
    I think the beauty of this is they can squash their competitors. I think that is the real play. Get rid of the developers who sell MMDs because they now sell them so high, they certainly will have to change their business model to sell it for $800! These vendors will now have to really re-vamp their business model or shut down.

    DeBeers and the diamond industry wins... no more annoying MMDs to compete with. MMDs are now relegated to compete with crystals. Who would want to buy a $800 stone to put it into a $2000 setting. Even more genius is DeBeers saying they will not grade these MMDs as they are synthetic and can be reproduced... as in, fake, a Walmart commodity. That part is total genius.

    I think that is the real hidden play here. What dealer can now sell $800 diamonds? Certainly no the same dealer who is selling the $12K MMD.

    A diamond lives on forever.
     
  8. KingKuda
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    by KingKuda » May 29, 2018
    Which would be fine, providing you can tell the difference with the naked eye, however this is not the case. It's like paying 10% for a fake handbag, knowing that absolutely nobody is going to be able to tell that it is fake. You'd have to be a fool to pay full price again.

    All I can think of is that this is a move that has been made to kill off all of the competition, then they will adjust the price once the new players are out of the game.
     
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  9. KingKuda
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    by KingKuda » May 29, 2018
    I think you are really under estimating this. The market for 'fake' products around the world is huge, let alone for 'fake' products that actually have the same characteristics as the real product and can't be told apart.
     
  10. Miki Moto
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    by Miki Moto » May 29, 2018
    Your example is exactly what I believe what DeBeers wanted to created... that MMDs are fake, cheap. And for the U.S. which is the largest diamond consumer due to the engagement ring, I seriously doubt brides will want a $800 fake stone that is comparable to a crystal or cubic zirconia. Sure, there are brides who buy cubic zirconia, but that is not the diamond market competition.

    I agree with you... this is a simple play to wipe out the MMD market. I do not think DeBeers will adjust it up. Their core business is the natural diamond business. They also own Forevermark.

    I honestly think this will help the entire diamond industry. The diamond trade now competes among themselves, so at least they can kill off the MMDs.
     
  11. denverappraiser
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    by denverappraiser » May 29, 2018
    Announcing in May an intention to sell a product in September for $800 is not the same as actually doing it. We’ll see what happens, but the competition has to deal with it NOW. The market is going to be disastrous for the next 4 months or more. DeBeers is clobbering the competition without doing anything at all. No one ever said they weren't clever.
     
  12. Miki Moto
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    by Miki Moto » May 29, 2018
    I don't know one person who has a fake diamond ring. I know people who do not care about diamond rings, but they do not go out and buy a fake one. How many people do you know have fake diamond rings? This is about diamonds, not fake handbags or fake polos.
     
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  13. KingKuda
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    by KingKuda » May 29, 2018
    But that is because cubic zirconias are a different product all together and that can be seen with the naked eye.

    A better example is having the option of 2 different handbags. Both are absolutely identical, same brand, same size, same appeal. One was made by a machine, the other hand made by an individual. Most people would go with whatever is cheaper, particularly when there is an 80% saving in doing so.
     
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  14. KingKuda
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    by KingKuda » May 29, 2018
    Because right now to buy a MMD you are only saving circa 20% of the overall value of a mined diamond so it probably isn't worth it. When that price difference drops to 80% however, things change substantially.

    The only way this makes sense is if the plan is to destroy the competition, then limit their production and phase out MMD. Else, it doesn't really make sense and nor do your comments and suggestions that people won't want a 90% saving for an almost identical diamond simply because it isn't the real thing.
     
  15. blueMA
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    by blueMA » May 29, 2018
    Well.. paying $5000 for a pair of overpriced MMD earrings is very different from paying $800 or less for visually indistinguishable good. This will inevitably hurt the natural diamond market in time. Will also crush the moissanites, lab sapphires, etc.
     
  16. KingKuda
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    by KingKuda » May 29, 2018
    Exactly my view, MMD's have just become even more appealing. People who were tossing up previously whether the 20% saving was worth it, will now have had their mind made up for them.

    The hope is still that this is a defensive move to absolutely crush the market by removing the players who can't afford to sell their MMD's at such a low price.
     
  17. blueMA
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    by blueMA » May 29, 2018
    It is definitely a move to crush all the competitions.

    However, I'm sure we're all soon going to assume people walking around with huge diamond studs on their ears or pendants are adorning synthetics, and then you'd have to wonder how many people will be willing to pay so much $ for the real deals, which was partly for the social status.
     
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  18. daneshpastry
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    by daneshpastry » May 29, 2018
    Business tactics aside, I'm looking forward to seeing what they produce.

    The whole strategy reminds me of Tiffany's huge success with its line of inexpensive(ish) silver jewelry.
     
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  19. blueMA
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    by blueMA » May 29, 2018
    Only a "0.25 ct. stone will sell for $200" means the stores will be bombarded on the day of opening.
     
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  20. AprilBaby
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    by AprilBaby » May 29, 2018
    It’s an interesting idea given that lots of millennial don’t have the money for a diamond. I could see my daughter choosing this.
     
  21. KingKuda
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    by KingKuda » May 29, 2018
    Which is what I think they are trying to put an end to.

    Suffocate the opposition, remove them from the market, then limit or even eradicate the production of MMD all together.
     
  22. blueMA
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    by blueMA » May 29, 2018
    They won't be able to suppress the market forever, and competitors will sprout as soon as an opportunity presents. I mean, all you need is a microwave...so to speak
     
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  23. KingKuda
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    by KingKuda » May 29, 2018
    I don't know if I agree with that.

    If they drop their prices that low every time a new competitor enters the market, they are going to completely cut the profit out of it for everyone. Why would someone invest the substantial capital required to manufacture these diamonds if they know that the risk of De Beers knocking their prices right down. It makes sense as a business model when you are selling your product for $5k a diamond, but it would absolutely crap itself at $800 a diamond.

    De Beer are clearly happy to operate at a loss for a period of time to strangle their competitors.
     
  24. blueMA
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    by blueMA » May 29, 2018
    DeBeers just won't be able to raise their price back up so easily, and it comes down to simple economics. The technology is known, and the equipment are out there, so just as in CZs or Moissanites, there will be international competitions as long as there are demands (with better cuts, designs, etc). The cost to manufacture these goods are quite low, and the only reason the MMD price have been inflated is because they sort of justified it with the past R&D cost.
     
  25. KingKuda
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    by KingKuda » May 30, 2018
    Where is your evidence to support this? Everything I've read to date has suggested the opposite, that the upfront capital required is substantial but the return on investment is appealing based on the market value of an MMD.

    If the price that a MMD is sold for reduces so drastically, I don't know which how existing players are going to survive and how new players will be able to justify entering the market. The equipment required to manufacture a MMD is far more substantial than other man made stones, or at least that is what I've been lead to believe. That is why there are currently very few players in the MMD market.
     
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  26. John Pollard
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    by John Pollard » May 30, 2018
    What many people may not realize is that the end-game for big players in the synthetic diamond market was never jewelry applications. Our world has been a convenient means to another end. The most innovative producers are focused on technological, medical and even military applications. Think D Flawless medical lenses, chips and quantum entanglement.

    You can find news regarding electronics (already 25% of the synthetic market) and check out some of the medical here. But the nerdy Star Trek quantum entanglement stuff has the most insanely cool potential. Honestly, it's so fascinating I can't wait to see where it goes... Based on past dialogue, @TreeScientist , if you haven't read about this stuff I think you'll enjoy it too.

    I'm a lover, not a fighter, but the basics of quantum entanglement and the Schrödinger's cat paradox it manifests suggests the possibility of coded military communications at a transcendent level.

    All this to say: The top synthetic-diamond producers are using jewelry applications as a convenient but passing revenue stream. They're focused on innovations which will bring trillion-dollar contracts with the likes of Apple, Pfizer, Raytheon or possibly entire nations, depending on what lies ahead.
     
  27. TreeScientist
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    by TreeScientist » May 30, 2018
    Wow, this is an interesting move indeed. But I can only say that it was just a matter of time. As mentioned by @blueMA, the only way the MMD distributors were able to somewhat justify the high cost were due to the R&D that went into developing the systems to produce large, gem-quality MMDs. That and they knew they could get these prices, so why not charge them? It's similar to when any innovative product comes on the market: For a while they will have a corner on the market and can charge whatever price they want, but soon others will replicate the technology, and then it will turn into a price war.

    I don't really agree with @KingKuda though regarding the motives behind DeBeers move. I don't think it's to squash the competition and then raise prices again. The low prices are here to stay. And I also don't buy the "If you can have a fake that looks exactly the same as the real thing, why not buy the fake?" mindset as a serious hinderance to the mined diamond market. The preference for mined diamonds exists because of their exclusivity. The "I can possess this and you can't so look at me," mentality. There's a lot of psychological principles behind this mindset, but let's just briefly say that it's not going anywhere anytime soon. If the preference for mined diamonds was really due to their sparky-ness and had nothing whatsoever to do with exclusivity, then everyone would be running out and buying the new 4H-type colorless moissanites, because moissanites are MORE sparkly than diamonds. I'll refer to this thread here where we discussed this very issue, and I'll also quote @gm89uk who summed up this point very well (couldn't have said it better myself):

    "I'm certain if diamonds were double refractive and moissanite wasn't, people would criticize the appearance of moissanite for not sparkling enough." - @gm89uk

    And finally, I also disagree with the handbag example provided above. My girlfriend is from Vietnam, the kingdom of counterfeit products. You can buy a Louis Vuitton or Coach knockoff that looks exactly like the real thing for about $10 there. This has been going on for well over 20 years. And the modern replicas look pretty sturdy to boot... But there are still Louis Vuitton and Coach flagship stores in the large cities in Vietnam, and they still look quite busy to me every time I've walked past them, despite the larger disparity between the product cost and average salary when compared to Coach stores in America or Europe. ;)2

    ... Exclusivity is a powerful drug.
     
  28. TreeScientist
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    by TreeScientist » May 30, 2018
    Excellent, informative articles on the possibilities of synthetic diamonds @John Pollard. I especially enjoyed the Salon article. Really cool stuff! I for one am looking forward to diamond screens replacing sapphire in future cell phones... So does that mean we'll be saying "My IPhone has a D color screen" in the future? :D
     
  29. KingKuda
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    by KingKuda » May 30, 2018
    Then I am afraid to say you are largely out of touch with the younger generations, those that are looking to buy diamonds now. As the cost of living goes up and the pressure to fit into what we see on social media follows, people are looking for ways to get the best without paying the most. The attachment you speak of to owning the 'real' thing doesn't really exist when the 'real' thing and the 'fake' thing are indistinguishable to the naked eye.

    Agreed, and those that can possess the real thing, will possess it. But for majority of the younger generation coming through, they can't afford it and if they can get an identical item for a fraction of the price I have no doubt they will. That's the biggest factor in this, it is an identical item. There will still be the top bracket of people who can afford the 'real' thing and will want the 'real' thing but at the moment, there are a lot of people out there my age who can't afford the 'real' thing but are paying for it anyway because they have no choice. I recently just dropped $15k on a ring, however had I of been able to pick up an idential MMD equivalent for $4k I can tell now I'd have jumped at it.

    The preference is not due to the 'sparky-ness', who said that? This is not a relevant comparison because you are comparing a completely different stone that can be spotted in an instant to the naked eye. What we are discussing here is the same stone, with the same properties, with the exact same appearance for a percentage of the overall price. Your quote is great and I agree with it, but it also not relevant. Younger generations love diamonds because we know no different. We grow up thinking one day we will propose with a diamond and not a moissanites because that is what we see on the TV and on social media. That is why a diamond is the benchmark and that is why a product that looks identical to a diamond in every way possible is more attractive to most then a moissanite with different properties. I'm sure if I'd never seen a diamond in my life and you put in front of me a diamond and a moissanite and asked me which was prettier, I'd probably say the moissanite.

    This is also completely wrong. A fake looks like a fake when held next to the real thing. It is distinguishable to the naked eye, isn't as sturdy and leaves you open to embarrassment when you tell the person next to you it is real, only to then find out they own the real version and can see all of its flaws. I've owned expensive fakes myself and never pass them off as real because I've seen far too many people lie and look like a fool. What we have here though is literally the exact same product that is indistinguishable. I know I keep going on about it, but absolutely nobody in the street without a bag of tools can tell the difference between a mined diamond and a MMD. They can pick it up and put it next to their own and still won't be able to call you out, that is the difference.

    A better way of putting it is a ring from Tiffany's. They are beautiful, exclusive, pricey and every girl would love one. However because of the premium you have to pay to get one, people instead go out, copy the design and get it made for 50% of the cost of a Tiffany's ring. The younger generations today want whatever is trending on Social Media, that is the reality. You will struggle to find a young girl who asks for a 0.5ct mined diamond if for the same price, she can get herself a 2.5ct MMD that looks identical to the diamond being worn by her favourite celebrity.
     
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  30. TreeScientist
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    by TreeScientist » May 30, 2018
    I agree with you on many of your points @KingKuda (I am a millennial as well), but to your point that:

    "We grow up thinking one day we will propose with a diamond and not a moissanites because that is what we see on the TV and on social media."

    I would change this to:

    "We grow up thinking one day we will propose with a MINED diamond and not a moissanite because that is what we see on the TV and on social media."

    Don't discount the power of this minor semantical difference, especially when considering the minds of those that have been indoctrinated by a few generations of marketing that a diamond formed over millions to billions of years represents your never-ending love for the woman you are proposing to. I do know quite a few in my generation that would buy these new man-made diamonds, but I would almost guarantee that these are the same people that would consider buying a moissanite. As mentioned above, I'm sure that this will push a few people who were on the fence about a moissanite or a slightly less expensive MMD over to the side of MMD. But to me, this brushing off of MMDs as "costume jewelry" by the DeBeers group, and pricing their new line accordingly while flooding the market with them, is a damn-near perfect tactical move, and I'm sure one that will go down in history as another example of the marketing genius of DeBeers.
     
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