As Marilyn Monroe famously sings in the classic film, Gentlemen Prefer Blondes, “Diamonds are a girl’s best friend.” But she doesn’t clarify whether she’s alluding to mined gemstones or those engineered in a lab. In the past few years, the lab-grown diamond market has grown exponentially. Valued at US$22.31 billion in 2021, according to global research and consulting firm Allied Market Research, it is expected to reach US$55.6 billion by 2031 at a compound annual growth rate of 9.8 per cent. In fact, the market is growing at such a rate that it is impacting the sales of mined diamonds, such as those from legacy brands like De Beers.De Beers’ half-year 2023 report showed that the total rough diamond sales volume of 15.3 million carats was in line with the year prior. However, revenue fell to US$2.8 billion from the previous year’s US$3.6 billion, marking a 21 per cent decline. The downfall derived from months of lowered consumer demand, lowered average selling prices, and increased expenses.Paul Rowley, De Beers’ executive vice president of global sightholder sales, acknowledged the impact of lab-grown diamonds, noting that “there has been a little bit of cannibalisation. That has happened, I don’t think we should deny that. We see the real issue as a macroeconomic issue.”The rise of the synthetic diamond marketThe first known batch of lab-grown diamonds was created by General Electric in 1954. However, at this point in time, the diamonds were considered too small and unrefined to be sold in the fine jewelry market. It wasn’t until the late 1980s that gem-quality, lab-grown diamonds became available on a commercial level to consumers. In 2018, the US Federal Trade Commission (FTC) shifted its definition of what could be marketed as a diamond, stating that it “is no longer accurate to define diamonds as ‘natural’ when it is now possible to create products that have essentially the same optical, physical and chemical properties as mined diamonds”. The sale and popularity of lab-grown or synthetic diamonds began to soar in the early 2020s, thanks to shifting cultural perceptions and various macroeconomic factors.Statista noted a 14 per cent decrease in diamond jewelry sales in 2020 from the year prior, due to factors like store closures, wedding cancellations, and varying closures or delays of diamond mining caused by the pandemic. However, in 2021, the market grew by 27 per cent as Covid limitations began to loosen up, the travel industry took off, weddings were being planned again, and consumers were “revenge” shopping in a variety of categories, including jewelry.The increased demand for diamonds, and the spike in mined diamond prices due to heightened costs in mining and polishing, led consumers to seek out more affordable alternatives. Where lab-grown diamonds were once considered “tacky” and of inferior quality to their mind counterparts, the high quality and low-cost of these gems, approximately 50 to 60 less than “natural” stones, enticed many consumers to switch over. On top of being more cost-conscious, lab-grown diamonds are appealing from a humanitarian perspective, too. While naturally sourced diamonds have long-held prestige for their rarity, the environmental damage caused by cultivating these gems, and the working conditions of those collecting them, are sticking points for younger generations of consumers, primarily millennials and Gen Z.  Data from Tenoris, an analytics company supplying retail and consumer trend data, confirmed that 17.3 per cent of diamond engagement rings sold in the US in February were set with lab-grown diamonds. A notable increase from the 1.7 per cent that were set with engineered stones in 2020.Competitive intelligence and market research platform MarketsandMarkets estimates that 70 per cent of millennials considered buying engagement rings and other forms of jewelry made of chemical vapour deposition (CVD) lab-grown diamonds this year. However, just as the price of lab-grown diamonds enticed many consumers to switch over, this may eventually lead to the market’s downfall.What’s next for the diamond marketAt the present moment, there seems to be no slowdown in demand for lab-grown diamonds, but there are some potential pitfalls that brands looking to tap into this emerging category need to keep in mind.As predicted by MarketandMarkets, colourless diamonds are projected to account for the largest share of the market through 2027. However, diamonds grown in CVD labs appear brown, so manufacturers must invest in solutions for cleaning the colour of these diamonds, which will reduce their margins in the market.Secondly, as both CVD and high-pressure, high-temperature (HPHT) synthetic diamonds become more commonplace, the resale value of these gems remains unsteady, adding a barrier to growth in this industry.Thirdly, in addition to companies like Brilliant Earth and Grown Brilliance specifically catering to the lab-grown diamond market, mainstream jewelry brands including Pandora, Kay Jewelers and even De Beers (until recently), have also stepped into the field in the past few years. As supply goes up, especially in a high-end retail category like jewelry, demand inevitably goes down, driving the price of products lower and lower. “With the increase in supply we’ll see prices fall through the price point and reach a level where, long term, it does not compete with bridal because it comes too cheap,” said De Beers’ Rowley. “Ultimately they are different products and the finite and rarity of natural diamonds is a different proposition,” Rowley pointed out.While De Beers attempted to enter the synthetic diamond market with the launch of its lab-grown diamond company Lightbox in 2018, the brand called a time-out in September of this year. In the same month, De Beers revealed it would invest in a US$20 million dollar media campaign, reintroducing its iconic “A Diamond is Forever” tagline, to promote natural diamonds ahead of the 2023 holiday season in the US and China.