The US is way out ahead of the pack when it comes to lab-grown diamond sales and consumer acceptance of the product, with the market accounting for the large majority of the world’s sales.
The fact that the UK market for the product is reportedly several years behind the US could raise questions for some retailers wondering whether it is worth their time getting in on the ground floor with lab-grown gems.
Carat London’s Scott Thompson, however, believes that the UK is actually closer on the heels of the North American market than many realise.
The founder and CEO of the London- and Hong Kong-based Carat cites research featured in The Economist “about two or three years ago” which included “a chart showing that 80% of diamonds by 2050 would be lab-created and that mining might not be quite as big.”
Thompson also claims that as little as 18 months ago, lab-grown diamonds accounted for just 2% of the worldwide diamond market. Now, he says, that number has risen to 6%.
“That’s a 300% growth rate over the past 18 months to two years,” he explains. “If you double that a few more times you can see that maybe the diamond future that’s been forecasted, it may be a little closer than initially predicted.”
If the US market for laboratory-grown stones is already so fully developed, it only stands to reason that this growth will mostly be overseas, and Thompson believes that the UK is comfortably in second place in the race to make the product mainstream.
“There’s demand for sure,” he says. “It’s growing fast. It’s not going away.”
So where does Carat fit into all of this? The company is a diverse one that does not like to pigeon-hole itself into one product type or revenue stream. For example, while it predominantly focuses on fashion jewellery, it is also unafraid to dip its toe into the fine jewellery segment.
“There’s demand for sure. It’s growing fast. It’s not going away”
Similarly, the brand sells its products to consumers via stockists as well as through its own stores and website. It boasts customers in the US despite the relative advancement of lab-grown stones across the pond, so it must be doing something right for buyers to be willing to ship its products in from abroad.
The founder, who co-manages the business with wife Heidi, says: “One of the key innovations through our 20-year history is being one of the first brands to work exclusively with lab-grown and synthetic gemstones.”
Going into more detail on the kinds of stones, materials and manufacture processes he is referring to, Thompson describes “very high-end cut and polished cubic zirconia,” as well as lab-grown rubies and sapphires.
He adds: “Also, diamonds aren’t just limited to white diamonds. You will notice on our website we stock both fancy yellow diamonds, pink diamonds, and we have some blue coming soon as well.”
The Covid effect
Thompson is feeling grateful for the UK arm of the business at the moment due to current restrictions in its other area of operation, Hong Kong.
Despite some of the lowest incidences of Covid cases and deaths worldwide, Hong Kong officials are sticking to their guns when it comes to the implementation of unusually strict Covid measures in the Chinese region that look unlikely to let up any time soon.
“Unfortunately, on the retail side of things, Hong Kong’s not been a great place for many people to be,” Thompson reveals, though he says that there are signs of hope.
“But there are much more encouraging improvements in sales performance for retail in Central London, and even in Hong Kong to some extent now, so we’re starting to see some light at the end of the tunnel.”
The phrase ‘light at the end of the tunnel’ could perhaps be an understatement, however, based on what Thompson tells Professional Jeweller next.
In recent months, he says, the business’ wholesale is up 30% on its 2019 sales. As with most companies during the last 18 months, meanwhile, online sales have been crucial, with e-commerce growth hitting 300%, an impressive figure even during Covid and the associated lockdowns.
This Thompson puts down to improvements Carat was making to its website even before the pandemic. He explains: “The general idea was that we needed to become an e-commerce company that had retail stores, rather than a traditional retailer with a website.”
The company is fortunate that it made these changes immediately prior to the Covid-19 crisis. The way Thompson describes it, Hong Kong, previously one of the biggest jewellery and watch markets in the world thanks to Chinese retail tourism, is not likely to see a resurgence to pre-Covid levels any time soon, if at all.
Due to these events, Carat’s brick-and-mortar presence in Hong Kong, which used to be about equal to its British footprint, has dwindled in favour of e-commerce in the region.
“We actually used to be about evenly split in regards to retail,” says Thompson, “because we had eight or nine locations in Hong Kong and similar numbers in the UK.”
As many others in the retail sector have noted, though, the pandemic was not the cause of this change, merely a catalyst.
Thompson explains: “Change was coming. This whole situation just accelerated it by two or three years. A lot of this stuff, frankly, began when Instagram broke through, around 2015 when social media moved from the computer to the phone. If you had 100 shops before that, maybe now you will have only 50.”
This is not to say that companies should expect revenue or profits to be halved though. E-commerce should more than pick up the slack, Thompson asserts, adding, “And maybe you invest more in each individual shop, making it an experience rather than just a place to buy stuff.”
“That’s a 300% growth rate over the past 18 months to two years”
Candidly the founder and CEO reveals that, between Covid and investments in the business, the company’s finances on paper would perhaps not appear as impressive as they actually are for the last year or two. What matters, though, is that thanks to these investments in both online and physical stores, Carat London is now set up to see its most profitable decade yet.
Looking at the thriving UK arm of the business specifically, Thompson adds: “We’re doing some restructuring in the UK. We need to rationalise our retail business. Obviously things are improving, but we need to rationalise pieces of that.”
Talking about shifting the company’s focus and aims slightly, he goes on: “Wholesale is really important to us. E-commerce is really important to us. International business is really important to us.
“However, the last 18 months has delayed a lot of these exciting developments, so they’re all taking place at once now. We can certainly see a bright, sustainable future ahead.”
Carat’s latest range is actually a return to a classic collection for the brand – its famous Cocktail range. “Yes,” founder and CEO Thompson enthuses, “we’re going back to old-school stuff with Carat.
“This is what the whole business is about, which is a larger-than-life look in our Cocktail collection. As we’ve discussed, the one part of our history is as a brand, and we’ve got a lot of really interesting new products to show people, but while maintaining that Carat London brand.”
Describing the sorts of products one can expect to find in the Cocktail collection, Thompson continues: “We’ve got a pretty cool line of drop earrings. Drop chandeliers is the kind of thing that we’re going for.
“These pieces will take you comfortably from the beach to the boardroom”
“If you look at the pieces, it’s more earrings and some other things than it is actual cocktail rings. So [we’re talking about] some pretty cool, new-in, very contemporary looks.”
What the brand is aiming for, the CEO tells Professional Jeweller, is to take what are usually considered “old-school, Victorian-era cocktail rings” and add a bit of edge and a bit of modernity into the mix to appreal to the contemporary consumer’s taste.
“This is a new jewellery company for a new generation, you know?” he finishes. “So you’ll see a lot of edgy new things coming in with what we do with air climbers and huggies, all the way up to cocktails. These pieces will take you comfortably from the beach to the boardroom.”
Under the banner of the hashtag ‘#CaratCollective’, the brand has embarked upon an expansive social media campaign that it hopes will benefit not just its own company but all lab-grown diamond businesses by shining a spotlight on the product and increasing consumer awareness of the more sustainable alternative to mined diamonds.
Scott Thompson explains: “It endorses the idea that lab-created is a thing, and it is beautiful and creative too.”
The creative potential for lab-grown diamonds is a side to them that is not often talked about, but Thompson makes a strong case for the great potential jewellery designers can find in the product.
“we want to push the limit on creativity around lab-grown diamonds”
In fact, Thompson also waxes lyrical about the improvements lab-grown stones can open up for global issues such as child labour, minimum wages, equal opportunities, employment for both men and women, in addition to the obvious climate change crisis.
On the design front, though, he says: “Recently we’ve been experimenting with some really nice pink colours that come out like reddish-pink diamonds, which in nature are extremely rare – so much so that maybe only a handful come out of the ground every year, if that.
“So this is an area we want to focus on in the coming year, is the creative side of things. It’s not just simple solitaire rings that we can create – we actually want to push the limit on creativity around lab-grown diamonds.”