De Beers undercuts the man made diamond price

[Serg]

Interesting to see Swarovski answer to Debeers challenge.
Swarovski has much better experience in design , promotion and sells silver jewelry than Debeers, but has not good access to LGD.

 

[chappy]

Wow, that is such a thinly disguised marketing ploy I can't even. Come on, not even Swarovski positions themselves as "stuff you wouldn't mind losing at the beach"!

This is a familiar move from De Beers, flooding the market with similar stones to kill off competition and regaining monopoly. They have deep pockets after all and can play the long game.

 

[blueMA]

Wow, that is such a thinly disguised marketing ploy I can't even. Come on, not even Swarovski positions themselves as "stuff you wouldn't mind losing at the beach"!

This is a familiar move from De Beers, flooding the market with similar stones to kill off competition and regaining monopoly. They have deep pockets after all and can play the long game.

I find it quite amusing as well. Such denigrating vitriol towards the product they're actually promoting, only to send a strong message. I don't mind commemorating the opening event by securing an affordable flawless blue diamond pendant- who knows if they'll raise the lowly margined price back up with increased demands?

BTW, a cute rat!

 

[ChristineRose]

I think we need to differentiate between fake handbags and counterfeit handbags. Some counterfeit goods are made in the same factory as the real goods and are exactly the same, just not licensed. The materials used may or may not be stolen, and it may or may not be of the same quality as the real goods.

If you find a truly perfect Gucci bag in a Vietnamese flea market, you should assume it's stolen, or steals Gucci's intellectual property. If you're just looking for a bag to fool people, some are meant to be believable and are of decent quality so that you can only tell with a head-on comparison, but most are not believable and are as cheap as possible.

 

[sledge]

However, the opportunity cost for such purchase is HUGE for the majority indebted public out there.

This is a term that many people choose to ignore, and why they are stuck and will remain stuck in certain income brackets and/or limitations. At the end of the day, all our resources are limited so we need to utilize them carefully. I really like to debate this topic when utilizing time, as every human being has the same number of minutes per day but how we choose to use those minutes can really make a difference in so many facets of our lives. Money is the same way. Rather you have large or small amounts, how you choose to spend/invest/save it can change your life.

I was just telling my dog that she may be getting a pink diamond on her collar this evening.

LOL, I was thinking my chocolate lab might be getting her own as well. Amazing how four legged furry creatures make our lives better.

Totally agree it's about defending their real bread and butter. It would be worth it to them to run this business in the red.

Or maybe just break even. But even a small loss would be acceptable if the marketing ploy and market share they seek out is successful. The interview that was linked said it all, when he mentioned they were investing roughly $200 million in the business but it was (more or less) chump change to their $5+ billion natural diamond business. At that level, money is viewed different and is being used as leverage to gain market share which is a smart play if done right.

I honestly think the older generation are losing touch with what millennials are truly after. I don't know a single person that would buy a mined diamond that is 25% of a MMD simply because it came from the ground.

Perhaps. But then again, you are taking it on yourself to speak for an entire generation and how each of them thinks the same as you. It's been my experience there are always exceptions to the rule so speaking on behalf of an entire generation is at best, dangerous.

And if your circle is so small and single minded that you can't think of a single person that has a different POV than you, then perhaps you need to make some new friends so you can be socially diversified and challenged. If not, you will always be confined to those thoughts and will essentially never intellectually grow as a human being.

Once again, relevance? I don't understand what this achieves other than stinking of an attempt to pump yourself up.

@TreeScientist was not pumping himself up. He was simply saying that regardless of the fact you were being an ass to him, he refused to let it bother him. More to the point, other people had been asses to him in his professional career that were much more of an ass clown than you and he was unphased, so he was using your lame example of ass clownery as a tactic that couldn't hurt him.

 

[blueMA]

Now easy - no unnecessary mean jabs. @KingKuda has made many valid points and so did everyone else who is entitled to their opinions.

LOL, I was thinking my chocolate lab might be getting her own as well. Amazing how four legged furry creatures make our lives better.

If diamond is going to be used for cell phones and watch faces, then why not for a dog name tag? I mean I have an engraved SS name tag for our sweet rescued mutt, but I think she'd love an engraved diamond tag that won't get scratched up easily? I see it coming in the future...

 

[Texas Leaguer]

Thank you @Aino, but trust me, it doesn't bother me at all. This sort of name-calling pales in comparison to what we sometimes see during the peer review process for scientific journals. You wouldn't believe how some reviewers react when your results challenge a theory they've worked their entire careers to support. Scientists develop a thick skin fairly quickly, or they'll never make it in academia.

I've honestly been surprised/astonished as well by some of the fake markets I've visited throughout Asia. It is really quite impressive the lengths they will go to in order to produce the perfect fake. I haven't been to Shenzhen yet, but I would love to see what they're capable of if I get the chance.

Thick skin is good to have. Like strong bark on a tree

 

[TreeScientist]

Now easy - no unnecessary mean jabs. @KingKuda has made many valid points and so did everyone else who is entitled to their opinions.

Sure, everyone is entitled to their opinions, and I thoroughly enjoy debating with those who hold a different opinion to my own. That is how we grow as individuals and expand our viewpoints. But when heated yet cordial debate turns into efforts to unjustifiably debase someone's character (aka callow name-calling) then I would agree that it crosses the line. @sledge was just calling a spade a spade, which I'm all in favor of. As my dad always told me "Son, if you dish it, you have to be able to take it."

This is a term that many people choose to ignore, and why they are stuck and will remain stuck in certain income brackets and/or limitations. At the end of the day, all our resources are limited so we need to utilize them carefully. I really like to debate this topic when utilizing time, as every human being has the same number of minutes per day but how we choose to use those minutes can really make a difference in so many facets of our lives. Money is the same way. Rather you have large or small amounts, how you choose to spend/invest/save it can change your life.

Couldn't agree more. And this topic is also very poignant to the discussion of real luxury goods vs fakes. I'm not against luxury goods. I own a few myself. But I always assess the opportunity cost of purchasing such goods. If the personal ROI that I receive from such good does not, in my mind, outweigh the opportunity cost of said good, then I either A.) Don't buy it or B.) Buy an alternative.

And the opportunity cost, which, when discussing goods/services purchased with currency, is related to the amount of time you need to trade to earn the money necessary to buy said item, will be different for each individual depending on their stage in life and current profession (i.e. what they do to trade their time for money). So simply saying that "I don't know ANYONE that would buy X luxury item when Y fake/alternative is available for Z price" is essentially saying that all people A.) Value that item exactly the same (the personal ROI) and B.) Have exactly the same income for exactly the same hours worked (the opportunity cost). This is shallow-minded indeed.

@TreeScientist was not pumping himself up. He was simply saying that regardless of the fact you were being an ass to him, he refused to let it bother him. More to the point, other people had been asses to him in his professional career that were much more of an ass clown than you and he was unphased, so he was using your lame example of ass clownery as a tactic that couldn't hurt him.

I was beginning to think I was the only one to understand the concept of relevance. Thank you for restoring my faith.

Thick skin is good to have. Like strong bark on a tree

Couldn't agree more. I can't say I'm at the level of an ancient redwood (the older members have bark up to 1 meter thick near the base!) but, like the bark of a redwood, my skin grows thicker with each passing year.

 

[sledge]

Now easy - no unnecessary mean jabs. @KingKuda has made many valid points and so did everyone else who is entitled to their opinions.

I wasn't discounting @KingKuda's points or opinions, except in regards to his personal attacks on @TreeScientist. I have a tendency to interject myself in conflict and maybe I shouldn't. With hesitation I apologize, but I'm keeping my eye on you, lol.

If diamond is going to be used for cell phones and watch faces, then why not for a dog name tag? I mean I have an engraved SS name tag for our sweet rescued mutt, but I think she'd love an engraved diamond tag that won't get scratched up easily? I see it coming in the future...

Technically I paid $50 for my lab, but seeing the people selling her and the fact she was a runt and her odds of survival were less than ideal, I consider her a rescue. Little did I know that was going to be the cheapest part of my ownership experience with her.

For awhile I dated a girl that would take her to the vet for me. While there, the DOG got treated to a spa day with facial rubs, painted toe nails, massages and grooming. Fast forward to current times and this lab has managed to wrap the current GF around her paw in the same manner. She is super sweet and well behaved (dog, not GF, lol) so I understand to a degree but really at this point, the damn dog deserves a diamond considering her manipulation skills, lol.

Trust me, I whole-heartedly agree labs are truly the smartest breed of dogs. My wallet has never been worked so hard. And I know people who will drop thousands on their fur babies without blinking an eye.

 

[Texas Leaguer]

Trust me, I whole-heartedly agree labs are truly the smartest breed of dogs. My wallet has never been worked so hard. And I know people who will drop thousands on their fur babies without blinking an eye.

Yes, but you can't compare them to luxury items. Anthropologists have concluded that human evolution would not have been possible without them.
Seriously.

 

[Miki Moto]

Okay folks... time for some fun and entertainment... great video of how a lab diamond is created.

https://www.nationaljeweler.com/blog/6665-growing-a-diamond-using-cvd-video

 

[blueMA]

I have a tendency to interject myself in conflict and maybe I shouldn't.

You'll just come out way ahead and be a lot more effective by substituting multiple "ass" along with other derogatory references, that's all. LOL

Trust me, I whole-heartedly agree labs are truly the smartest breed of dogs. My wallet has never been worked so hard.

I disagree - I bet my DNA tested mutt (Great Pyrenees, Australian Shepherd, Golden Retriever, Lab Retriever and 4 generations of other mutts) runs circles around yours! JK

She is by far the smartest and emotionally intelligent dog I've had, and I found her as a stray rescue at around 2 yrs age at a PetSmart adoption event when I went there to get a goldfish. No one was adopting her for many months, but for some reason she sought us out while she ignored other people. I was able to completely train her from a total blank state within two weeks from where she didn't even have a clue of what "no" meant and wasn't even potty trained having been an outdoor dog (scars around neck and feet) until she went stray. She also cost only $50 to adopt, but we had to treat her for heartworms, fractured teeth, detached dew claws, etc. etc. She also broke my tooth once when she got too excited, which cost me near 2K to fix.

Now she's an indoor dog, rings bells to go outside, watches TV with us (I'm serious), sleeps under Belgium Linen sheets on our bed and eats green smoothies & table scrap proteins (lots of rib-eyes and filet mignons) mixed in with her grain-free food. She's so grateful, fiercely loyal and positive, we can't stop buying her toys and my husband calls her a "divine intervention" from God. She sees me as an alpha and behaves around me, but acts like a spoiled daughter with my husband frequently busting his sensitive parts. We just love her to death. Hubby even got a truck for her, so a little pink diamond is nothing.

 

[Paul-Antwerp]

What I am missing in this discussion is a rough calculation. So, let me give it a try.

Thus, a new production-facility is destined to produce 500,000 ct. of rough in 2020.
Estimations are that this will result in 200,000 ct. of polished, in one article even 250,000 is mentioned. I find that very optimistic, and would expect about 150,000 ct. of polished. Not only is a 40% yield extremely high, in this kind of product, it makes little sense to chase the last point. If you are going to sell cheaper jewelry in volume, you want almost straight 0.25 Ct., 0.50 Ct. and 1.00 Ct., no? Hence my estimate of 150,000 ct.

In income, at 800 per ct. retail-value, that represents $120M.
Cost of cutting is roughly $25M.
I have heard about a marketing-budget of $30M somewhere.
Gross profit for the retailer, I estimate at $60M for such cheaper items, at least $40M.
Investment-cost for the new production-facility: $94M
Still to guess about: personnel, distribution, management, …

All in all, it seems that the sales-price is far below the actual cost of the product.

Given the long-term experience of Element Six in synthetic diamonds, and the clearly high volume-possibilities of this new venture, compared to other producers of bigger-size synthetic diamonds, should this not be a topic for an antitrust-case?

For all industries and very many new technological processes, the use of synthetic diamonds is extremely important. Using the currently produced synthetic diamonds in a new product however costs a number of years in development, and to overcome this period of time, the sale of jewelry-diamonds is essential for the producers of synthetic diamonds. A big player killing competition by selling at first sight below cost is worrying.

Live long,

 

[blueMA]

All in all, it seems that the sales-price is far below the actual cost of the product.

Given the long-term experience of Element Six in synthetic diamonds, and the clearly high volume-possibilities of this new venture, compared to other producers of bigger-size synthetic diamonds, should this not be a topic for an antitrust-case?

I agree, and expect to see some headlines.
A the same time, I'll be grabbing a few of the below cost product.

 

[sledge]

There are many variables at play here that we don't know.

I would think the $94m production facility will be capitalized and depreciated slowly. Cutting costs could be less with their new overseas partner. Marketing costs seem grey at best. And while operational positions seem to be separate, I wonder if other functions like accounting, marketing, etc will be somewhat of a shared resource/cost.

Profit margin is debatable. I don't sense they care much about remaining an independently profitable division so much as contributing to the overall effort of DeBeer's. If they can gain and control market share and not lose a ton of money then I think they are perfectly happy. By their own words, this is roughly a $200m operation that while is a considerable amount of money is a drop in the bucket to their $5-6b primary focus. I have to assume they will put quality managers and teams in-place to ensure there is no hemorrhaging of profits that would affect their core business unit.

 

[Tekate]

To me in my long history with a semiconductor company slapped on its head by the EU, the Antitrust Division(?) of the EU is a GREAT place to start should some companies wish to. The US? not so much right now. I think your point is very interesting and it will be interesting to see if this happens. Thanks.

What I am missing in this discussion is a rough calculation. So, let me give it a try.

Thus, a new production-facility is destined to produce 500,000 ct. of rough in 2020.
Estimations are that this will result in 200,000 ct. of polished, in one article even 250,000 is mentioned. I find that very optimistic, and would expect about 150,000 ct. of polished. Not only is a 40% yield extremely high, in this kind of product, it makes little sense to chase the last point. If you are going to sell cheaper jewelry in volume, you want almost straight 0.25 Ct., 0.50 Ct. and 1.00 Ct., no? Hence my estimate of 150,000 ct.

In income, at 800 per ct. retail-value, that represents $120M.
Cost of cutting is roughly $25M.
I have heard about a marketing-budget of $30M somewhere.
Gross profit for the retailer, I estimate at $60M for such cheaper items, at least $40M.
Investment-cost for the new production-facility: $94M
Still to guess about: personnel, distribution, management, …

All in all, it seems that the sales-price is far below the actual cost of the product.

Given the long-term experience of Element Six in synthetic diamonds, and the clearly high volume-possibilities of this new venture, compared to other producers of bigger-size synthetic diamonds, should this not be a topic for an antitrust-case?

For all industries and very many new technological processes, the use of synthetic diamonds is extremely important. Using the currently produced synthetic diamonds in a new product however costs a number of years in development, and to overcome this period of time, the sale of jewelry-diamonds is essential for the producers of synthetic diamonds. A big player killing competition by selling at first sight below cost is worrying.

Live long,

 

[Lisa Loves Shiny]

I agree, and expect to see some headlines.
A the same time, I'll be grabbing a few of the below cost product.

Me too.

 

[daneshpastry]

While we're on the discussion of the marketing genius that is DeBeers - what are everyone's thoughts on these:

https://www.debeers.com/jewellery/collection/talisman

Basically, selling rough diamonds to the public. Mixing them with cut diamonds is basically brilliant - it appeals to those who want an organic look, while still purchasing a luxury item. Almost like Comme des Garcons selling polyester suiting for twice the price its wool/silk competition.

 

[blueMA]

While we're on the discussion of the marketing genius that is DeBeers - what are everyone's thoughts on these:

https://www.debeers.com/jewellery/collection/talisman

Basically, selling rough diamonds to the public. Mixing them with cut diamonds is basically brilliant - it appeals to those who want an organic look, while still purchasing a luxury item. Almost like Comme des Garcons selling polyester suiting for twice the price its wool/silk competition.

Interesting... Love the artisan look but seems waaaay overpriced. Not for me.

 

[Texas Leaguer]

Implementing a program like this requires a lot of estimates and assumptions. New ventures are rarely predicated on immediate profitability. It is completely logical to peg the launch to a prediction of where the cost of rough and competitive landscape will be at a point in the future where they hope to turn a profit (assuming they intent to). The venture could be more or less in line with market conditions at launch depending on how accurate the assumptions are about trajectory of the market, and in particular about the increasing production and decreasing cost of the rough over time. Most businesses are conceived and launched into markets where these things are better established and more predictable.

Regarding the anti-trust idea, I think it would be a stretch to prove such a thing given the uncertainties surrounding this market in general. And I find the notion that Debeers is attempting to put the other producers out of business so they can corner the market (and then raise prices), very unlikely. While inevitably individual ventures will fail, and while this move by Debeers will put enourmous pressure on some, the MMD industry is not going away. Many businesses (especially those operating in new markets) regularly forego profitability in favor of market share. Of course, this is not sustainable long term, but a company like Debeers can afford to do it longer than most, especially if it enhances or protects their core business.

Debeers is mainly re-framing the narrative about synthetic diamonds and their logical place within the jewelry business. And the narrative they are creating is to a large extent just an acknowledgement of where the industry will end up going anyway, based upon a good understanding of consumer behavior and the historical life cycles of other synthetic gem materials.

 

[Serg]

For my very rough calculation the cost of production 1 ct polished LGD could drop in few years to 150-250$
( on factories with 200.000 ct per year and more and 10 years equipments depreciation . cost of polishing from CVD rough could be much less than for natural diamonds )

if we deduct 50% retail margin from 800$, the difference 400$-250$=150$ gives reasonably good profit(10-20% from investments into new equipments ) even after deduction aggressive marketing ( 20M per year)

in same time market niche for cheap LGF( specially for fancy color diamonds) could be much more than 250.000ct per year( it easy could be 2.5M carats per year and more)

 

[yssie]

Re. “What stops someone from having one of these recut and sent to GIA, say” - the other half suggested they’d probably embed a logo into the center of the stone during deposition.

I’m sure he’s correct. Easily done since they control crystal growth, absolutely permanent (unlike surface treatments), likely loupe-visible.

 

[blueMA]

and while this move by Debeers will put enourmous pressure on some, the MMD industry is not going away.

Agree - all one has to look at is Moissanite. The price of the stones used to be quite high for R&D, but as soon as the patent expired, loose stones from China are quickly being offered at extremely low prices. We all knew it was a matter of time before lab diamonds drop in price, but De Beers is simply cutting to the chase.

 

[Texas Leaguer]

@Serg makes a good point about cutting costs for MMD. Because yield will no longer be the key consideration for the cutter, you can essentially eliminate the need for skilled craftsmen and gear up for fully automated production. In a relatively short time it will be possible to crank out uniformly well cut synthetics at a fraction of the cost of cutting natural today.

 

[blueMA]

Re. “What stops someone from having one of these recut and sent to GIA, say” - the other half suggested they’d probably embed a logo into the center of the stone during deposition.

I’m sure he’s correct. Easily done since they control crystal growth, absolutely permanent (unlike surface treatments), likely loupe-visible.

https://lightboxjewelry.com/pages/laboratory-grown-diamonds

See this video. It seems the stones will be laser-inscribed though the top of the table. I read somewhere it'll be internal and non-removable? Perhaps on the minute starter slivers as well?

 

[Texas Leaguer]

Debeers have had a technique for internally inscribing diamonds since at least the late 1990's. They marketed a collector program of "millenium" diamonds in 2000 that featured these inscriptions. They were different and much more discrete than the surface laser inscriptions requiring a special high magnification viewer to see. It was pretty cool, but kind of unwieldy. Not particularly user friendly!

 

[Karl_K]

It has been fun reading this thread.
Using dominance in one area to finance a take over in another related area is actionable in court.
DeBeers no longer has enough of the market for that to happen in the US I think, however the UE has lower thresholds.
It is also rarely if ever enforced or google would have been busted up a long time ago.

I forget the technical term but the logo will more than likely be made by using 2 lasers.
Both are too weak to burn the material but when both are focused on the same point they are hot enough.
This way a logo can be made internal to the diamond.

 

[bludiva]

While we're on the discussion of the marketing genius that is DeBeers - what are everyone's thoughts on these:

https://www.debeers.com/jewellery/collection/talisman

Basically, selling rough diamonds to the public. Mixing them with cut diamonds is basically brilliant - it appeals to those who want an organic look, while still purchasing a luxury item. Almost like Comme des Garcons selling polyester suiting for twice the price its wool/silk competition.

agree w/ @blueMA i think the pricing is too high for what it is. i wonder how diamond in the rough is doing...i think some of their items are beautiful but they're also extremely pricey for what they are, like 5-10k for these eternity bands.

 

[WinkHPD]

I was interested to see on their website that they're planning to sell necklaces and earrings, but no rings, and that they're setting them only in silver or 10K gold. Nothing bigger than 1ct, and no rings. They're positioning them as costume jewelry, very distinct from precious engagement jewelry. Of course, there would be nothing stopping you from buying (say) a 1 ct pendant in the cheapest silver setting and having it reset in a ring, but I think they're hoping people won't think of that or won't know how to do it--and maybe jewelers will cooperate in making it difficult. I very much doubt they'll be selling the MMDs loose, and it's interesting that they're not going above 1ct, at least not now.

Welcome back Dear Lady,

You have been missed.

Wink

 

[kgizo]

I am not familiar with MMDs. Are all MMDs discernible from natural by experts or is it just the DeBeers MMDs since they say they will be marking theirs in a permanent way?
I will be interested to see them. I could see buying blues and pinks for earrings, and whites to be reset into moi et toi and three stone rings.