COUNTER cultured

CALL THEM CULTURED, MAN-MADE, OR SYNTHETIC: RETAILERS WHO SELL LAB-GROWN DIAMONDS SAY THAT SALES SPEAK FOR THEMSELVES.

COUNTER cultured #1
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"I love cultured diamonds, and I did the moment I first saw them," says Joe Schubach of Joseph Schubach Jewelers, Scottsdale, Arizona. He's speaking of the deeply saturated yellows created in high-pressure, high-temperature (HPHT) chambers by Gemesis Corp. "I've been with Gemesis from the start, and while I initially saw a lot of resistance among my peers to cultured diamonds, I think what they offer at retail is clear: sales that might not have been made otherwise; a new type of client; a luxury that would have been otherwise unaffordable; and most important, the ability to individuate with a unique product. In a market as competitive as Scottsdale, that's huge."
Schubach's operation is unique, making him fairly typical of jewelers who carry lab-created diamonds: forward-looking, open to alternatives, and web savvy. The family business is just shy of a century old, with doors once in three states, including nine in the Phoenix area. After he took over the business in 1994, however, Schubach closed every door, took a thousand square feet in an office building and opened a design-centric, appointment-based salon tailored to on-line sales and marketing. The first Arizonan to offer moissanite, his inventory also includes Chatham lab-created diamonds, sapphires, rubies, and emeralds; fracture-filled diamonds; and simulated stones.
Call them what you will, diamonds grown in machines are still as controversial as they've been since their 2003 write-up in Wired, a story that certainly put man-made on the map. Retailers, however, are seeing straightforward results. "Techies love them," Schubach says. "Environmentally and socially conscious people. People who didn't know fancy colors exist, or third-time diamond buyers who've always wanted one, but could never afford a fancy. Fashion buyers, but also bridal. If I have a reservation, it's that they're pretty much maxing out at 1.5 carats, and demand for 2 carat-plus is big and growing."
"I have a long list of people who want one caraters," says Alexandria Matossian of Bostonian Jewelers. "The bulk of our stones to date are less than a half-carat." She's speaking not of HPHT yellows, but of whites from Boston-based Apollo Diamond, which grows stones by the chemical vapor depostion (CVD) process. Bostonian is the first jeweler, and currently the only jeweler, to carry Apollo. "We're getting so many calls from out west," says Matossian, "and two a day from England, Australia, Canada. I suspect there will be other retailers before long." Apollo president Bryant Linares says the company will be "exploring the expansion of retail" later this year.
With seven bench jewelers, Bostonian is also a unique operation. Jewelry manufacturers for 30 years, with a decade-old Internet presence and a pioneering technological bent, they opened a design-oriented, appointment-based door in a diamond district building 12 years ago. That business rests heavily on referrals, Internet marketing, and on a very new type of customer.
"I'd say 25 percent of new calls are Apollo-based," says Matossian. "Some have spoken of the environment or conflict. But this is Boston and the bulk of local interest is from techies buying Apollo for loved ones, or simply to sit next to their computer. Some have been watching the process develop for years, and the romance for these customers—and I think it's a legitimate use of the word—lies in a very full understanding of the process."
Because of the less than a half-carat average size, Matossian has found her greatest CVD use in jewelry is as side stones. The local connection with Apollo is important, but it runs deeper. "We met the Linares family in 1999 [founder Dr. Robert Linares, who began with CVD for use in semiconductors, and his son Bryant], when Jewelers of America did a seminar," she says. "They're people who genuinely want to help the world, and you can't mistake that. It's about as non-synthetic as you can get." That positive feeling extends to Apollo buyers. "There's an aura to these sales that's very positive. I've certainly never had a customer say, 'Ugh, that's synthetic.'"
If there are negatives, they are the size limitation and some initial price confusion. "People who've Googled us, Apollo, or CVD have generally gone to the Wired story, and are a little surprised these aren't $5 a carat. The size issue is serious to the extent that I could say it's sometimes a challenge to sell a stone that small. Price is usually overcome in the initial phone call. We have a woman flying in from England next week for a 53 pointer, to cite a fairly typical example. It turns out she can get a flight for less than the premium for a mined stone of that size, plus the trip." While not the first time a client's flown in to see an Apollo, what makes that sale typical for Matossian "is the story itself. There are just so many that go with these sales."
MAN-MADE OPPORTUNITY
Clearly, marketing cultured diamonds by way of a story is built-in. But what about the business end of the sale? Do lab-created diamonds sell best loose or finished? If finished, do semi-mounts apply? Could they be replacement stones in designer settings? Fashion or bridal? Brick and mortar or on-line? If the latter, should you auction them on eBay? Turns out all the above are working.
Ira Kramer of Rockville's Diamond Exchange of Maryland sells only loose Gemesis lab-grown diamonds from Renaissance Diamonds, Boca Raton, Florida, which specializes in jewelry set with Gemesis diamonds. (The company is not related to Renaissance Platinum in Los Angeles which sells Gemesis diamonds in platinum mountings or Renaissance Diamond in New York, which doesn't sell synthetics.)
"I have their postcards on my desk, and I've sold stones just by showing clients those rings and bracelets," Kramer says. "They have a catalog on-line, which I'll use for illustrative purposes, and I carry a limited number of semi-mounts, which have helped me sell a few bridal Gemesis stones."
Kramer, who partnered with Renaissance in 2007, is a typical maverick cultured retailer. With 42 years in the business, he shrunk his to an 800 square foot office after a 1996 robbery of his Rockville store. He's also old enough to own 99 percent of his inventory. Now he says he wouldn't have it any other way. "No cases, watches, crystal, or brands in my office, and I do my business across the desk." He achieves a 7x turn on Gemesis yellows from that desk (industry turn for all diamonds averages out at 1.2), "with simply no sign of a slowdown. They're here to stay."
"I can say that with assuredness, and particularly with last Saturday in mind. It was a guy in with his fiancée for wedding bands. He'd come to me originally by himself, with a specific designer mounting she wanted, but he was also an eco-friendly, aware guy, conflict in his mind. I showed him a vivid stone, and it fell into his price range, $5,000 to $6,000. I had a stone in the safe that met his criteria, and the sale was made. From there, it was 'Were you looking at wedding bands'? There was no way they would price shop me for the bands, and I've had two referrals from him since. That's as real as retail gets."
That reality, Kramer feels, lies "in the nature of the stone. Yes, the story, yes, the flexibility of that story, and yes, price. Look, after that Wired article, as a retailer, you are going to get the call—not for $5 a carat but maybe $500 a carat. I'd say 20 percent of the calls begin and end that way. So you move on to the next call." Referrals keep those calls coming. Renaissance president Neil Koppel says he gets anywhere from 10 to 30 inquiries for referrals a day. Says Kramer, "I hear how lousy Christmas was. My season was outstanding, and a significant part of it was this new type of sale."
Kramer attributes much of his loose Gemesis success to two proprietary Renaissance cuts: the 80s Cut, a round brilliant variant, and the fancy shape Renaissance Cut. "They call that a cushion-round variant, but I just see it as a beautiful rectangle." The 80s Cut is particularly germane to the cultured story, being a round. Love them or hate them, there is no denying the intense saturation of lab-created diamonds. All retailers spoken to cite ballparks of intense to vivid. "If anything," says Kramer, "I'd lean toward vivid more than intense."
"If I had a criticism," says Schubach, "it's that they're so saturated—and with Chatham diamonds, and more so with their emeralds, so clean—they can lend an impression of artificialness. And that's a weird thing to get in a deep, flawless stone and say to yourself: 'Sheesh, I wish this had an inclusion.'"
The round, because of its brilliant return of white light, will often cost a fancy color a saturation grade or two. The stone will have the same body color as if the rough had been cut to an asscher, cushion, radiant—shapes that "face up" more yellow or orange. For cultured stones at retail as much as 25 percent are round, many achieving the vivid grade. That creates virtually a new category of diamond and goes a long way toward bridal sales—even if, thus far, most cultured bridal product has some mined white diamond as an accent or side stone. So too, for that matter, does much of the existing jewelry inventory for the more predominant cultured fashion pieces.
The fancy colors—being so saturated—are always the highlight. "When jewelers get together at shows," says Diane Christensen of San Mateo, California retailer Christensen & Rafferty, "we always eyeball what everyone else is wearing. We carry Solaura [Michael Werdiger's designer jewelry line featuring Gemesis], and I bought one and wore it at Basel. I have to say it really caught a lot of eyes."
Christensen says the jewelry is doing well, "not gangbusters, but it's still early." Limited, again, thus far mostly by size, she has also sourced loose for the store's customized collection, which tends toward highly expressive pieces for what Christensen calls "our very adventurous clientele." One truly adventurous client, currently looking for a vivid natural yellow or yellow orange recently taught Christensen a valuable lesson on color.
"We found one for $800,000, and my first thought was it really doesn't look that much different than a Gemesis. I realized we think we know color, particularly yellow, because we see so much of it. But we really don't. These diamonds are going to expand our understanding of what fancy colored diamond really is, and almost certainly help grow the category."
CHANGING THE CULTURE
The Chatham family, pioneers of lab-created gems for 65 years, is a name synonymous with man-made emeralds and other colored gemstones. President Tom Chatham, who began traveling to the Soviet Union in 1984 to explore the technology's application to diamond, was producing white goods in Kiev by 1993 and by 1996 had a diamond big enough to send a shudder through the industry when he unveiled it. He notes some huge differences with his lab-created pink and blue diamonds. "It takes us a year to grow an emerald, six months for rubies and sapphires, and three days to grow a diamond," but he says the big difference this time is at retail. No one's shuddering now. They're listening.
"I can tell jewelers all day that my emerald is an emerald, and they won't get it. With diamond, it's simple. Crystal structure is cubic, refractive index is 2.42, density is 3.52, dispersion is .044, and it's 10 on the Mohs scale. Chemically, physically, optically, they're the same—unlike, say, moissanite, a silicon-carbide that approximates diamond but is clearly a different animal. Even where I see initial resistance among curious retailers, I've been very surprised to see how easily it's overcome."
Part of the readiness to recognize lab grown diamond as diamond, Chatham guesses, is the size of the market. "With the diamond," he says, "you're talking about everyone's bread and butter." Spiraling mined diamond prices and spot shortages lead to greater interest in lab-created, but Chatham feels it may run to the paradigm shift level. "The growth of technology in everyday life," he ventures, "to the point where just everybody has some. And a truly new willingness to change, to be forward looking. The days when retailers sat on their heels in downturns like now, some will always do it. But fewer and fewer, don't you think? I hope so."
Patrick Murray was a skeptic for years, but no longer. His Boca Raton Atlantis Jewelers enjoyed "a very merry Christmas," buoyed largely, he feels, by his adoption in October of Renaissance Diamond jewelry, a few pieces sourced more directly through Gemesis, and by pinks and blues from Chatham. "I'm a GG," says Murray. "So I was taught, and for all those years I thought, you've got natural diamonds on one hand, and synthetics on the other."
His introduction to the category was personal. "I'd started on a new setting for my wife's 3 carat engagement ring with pink accent stones. Over a few weeks, I got in eight pairs of natural pinks—we're talking 5 points or so. They were hard to find, price range was $1,300 to $13,000, cuts weren't good, matches were worse, and most weren't really that pink. I stopped by a pink dealer at the JIS Show, and the best stone he had, a carat or so for $105,000, looked like pink rock salt."
That carater led Murray to take a flyer on a pair of Chatham pink rounds. "They were exactly the right color, clean as can be, and my first thought, looking at them, was of a problem sale a few years back. A lady had decided on a three-stone ring: A 3 carat round white center, and she wanted 1 carat intense round yellows for flanking stones. When you get into the world of round fancies, you get in real deep, real quick. Just finding a pair, even one, is trouble enough. Then you get into price, and for intense you're talking about a lot of money for not terribly saturated stones. She eventually settled on cushion cuts—reluctantly, but the problem was solved."
When Murray agreed to look at Gemesis in Renaissance jewelry, "and saw how vivid they are," he saw more than a problem solved. He saw an opportunity. "In the back of my mind, there was that little GG saying fake. But these colors are a true duplication of nature. I've seen exactly those colors before. Except, these diamonds, you don't have to move tons of earth, no one loses their arms, and they take less energy to make than running a hair dryer."
COLOR THEORY
Color made the difference as well at Carroll's Jewelers, Marion, Ohio. They're the quintessential small town jeweler with a slight difference. Carroll's was among the first to carry color enhanced and irradiated diamonds and are strong with Chatham emeralds and the occasional sapphire. Manager Marianne Brammell was struck by the immediate customer acceptance of their launch of jewelry by Pintura, a New York Gemesis-based jewelry manufacturer. "I can imagine the environment, and conflict, being important to customers, but for us, it's all about the color of the stones, that beautiful canary, mustardy shade."
Color was what overcame initial skepticism at Justice Jewelers, Springfield, Missouri. Owner Woody Justice has been a fancy color fanatic since his days as a tutor and grader at the New York GIA lab 35 years ago. "But that and through glass is about the only time I saw pinks or blues," he laughs. "Same with my customers. But one of our core values is if a customer wants a product and it's legitimate, we'll go out and get it. It's not for us to decide that lab-created isn't right."
"We carry mined yellows and browns and I've sold a few pinks in my life. But for years, every time someone came in about a pink or blue, we've had one hand reaching for the sapphires, and the other to call 911, once price came up. I met Tom Chatham a few years ago, had my doubts, but I finally took the plunge. We're averaging about 1x turn so far, but I have to say, it's changed my mind. Not just about lab-created gems, but about our business, more so as we head into this downturn. I think the days of us selling rarity and snobbery are over. We have got to start selling pretty again."
Pretty is what finally sold Justice on Chatham. "I'd have to say the best-seller for us so far is Chatham's alexandrite, being a surrogate birthstone for pearl for June, and the color changes in their alexandrites are right up there with the best naturals." But it was the color of the fancies that got him started: "They're just so pretty, and there's no difference between theirs and the ones you see through glass in Vegas, with two exceptions. One, it's rare for a small blue mined diamond to have that much intensity, so if you really know color, it'll strike you as odd. Second, it's rare to see that range of pinks." Chatham confirms, "If I make 100 pinks, I may well get 100 shades. And so far, there's no controlling it."
"Because size range is, generally, 1/2s to 3/4s, we're using them mostly as sides," says Justice. "I think it'll take time to build, like anything of value, but I'm confident it's going to happen, and that it'll open all kinds of opportunities, both for the people who're drawn to what's new and pretty, and just good old American buyers looking for a deal."
FASHION AND BEYOND
Opportunity is what got Los Angeles shoe designer Taryn Rose interested. An orthopedic surgeon by training (it was her observations of injuries to women caused by designer footwear that got Rose into fashion design), it was the technology, novelty, and intensity of Gemesis yellows that led her to cultured diamonds, and to foray into jewelry.
"An ideal fit for my DNA for a new category," she says. "Technology that benefits women." Rose made pieces for herself prior to hooking up with Gemesis through Cultured Diamond Co., a South African manufacturer of Gemesis rough, but says that jewelry "might well not have happened for me without their cleaner, less expensive fancy colors. That and the ability to present something no one else has."
Exclusivity is an essential to Rose's creations. Each design is limited to five pieces. Perhaps only a designer coming into jewelry from the outside, without preconception or training, could design so freely. And in that regard, her cultured diamond motifs parallel the category's newness. In talks with a leading high-end chain for a limited edition jewelry collection, Rose may well achieve the next breakthrough for cultured diamond jewelry: national distribution at multi-door venues.
For years, and even since his tragic passing, Steven Kretchmer personified that strange juncture where technology, jewelry, and fashion meet. I came upon the name of Bill Pearlman while Googling Kretchmer for this story. Owner of Battle Creek, Michigan's Pearlman Jewelers, he may well have stumbled onto the ideal frontier for cultured diamonds: the Internet. Pearlman was on-line early, and his site is now up to 4,000 products.
"Our rust-belt area of Michigan," he says, "has been among the hardest hit financially for years. We've been a Main Street jeweler for 78 years, but about a decade ago, I realized: I'm a jeweler, but also a businessman, who has to offer his customers a choice. I can go on catering to the two to five percent in the Battle Creek area who can afford jewelry, or I can try, on-line, to reach the five percent of America that can afford the finest."
For Pearlman, "finest" meant a catalog of important stones—his site showcases four-plus pages of mined diamonds, but more often the work of national designers. Pearlman revamped his model. Less than half his downtown storefront is now devoted to retail operations. The bulk is given instead to his on-line sales operation. His employees now are high-tech people and graphic designers.
Kretchmer was among the first designers to allow his work to be sold on Pearlman's web site. He also now offers Ritani, Michael B., A. Jaffe, Michael Bondanza, Jane Taylor, as well as 30 other names. Also on the site, Pearlman offers lab-grown diamonds, loose or in designer mountings. He even formed a joint partnership with Advanced Optical Technologies Corporation, a lab-created diamond producer in Ontario, Canada, to create D.NEA (formerly known as Adia) Diamonds. The yellow, blue, and white diamonds are grown in Eastern Europe and cut in Antwerp.
D.NEA's lab-created sales are entirely on-line, direct to the consumer through Pearlman's site and a separate D.NEA site which features designs by Kretchmer, Ritani, and Jane Taylor. Typical sales for Pearlman are D.NEA yellows (usually vivid or intense at 1-1.75 carats) or blues (averaging 1 carat, fancy light to intense) set in designer pieces.
"I have partners and can't say how good business is," Pearlman says. "But we're less than three years as a start-up and it's paying for itself. A lot of our customers are true radicals when it comes to the environment, conflict, hating the cartel. What I've found, surprisingly, is that a lot of these radicals are card-carrying Republicans, who've just gotten sick of steroids and hormones in their meat, and holes in their earth. A lot are from the west coast and the other green belts, Boston through Maine, the Pacific Northwest, but I'd also approximate that 15 percent of sales are overseas, mostly to Australia, Germany, and England."
"I'm also on the phone a lot these days with New York investment bankers and analysts. And while it's true they're outsiders to the business, it's also true they have fresh eyes to look at what may well truly be a significant shift. And what they're seeing is 7-15 percent of the trade moving to lab-created diamonds by the early part of the next decade. And several have said, and have gone out of their way to say it: These diamonds will be demanded, rather than settled for. With 35 years in retail, I know—even if I weren't in this already—that I'd open my eyes real quick the moment I heard that."
So HOW MANY Are There?
How is supply? By all accounts, no problem—in small(ish) sizes. "When I sell one Gemesis," says Ira Kramer of the Diamond Exchange, "I order, and two days later it's here. Unless you're talking about a large stone, I can always pick up the phone and get what I want." Reliable supply is a great strength to the category.
Woody Justice of Justice Jewelers says the same about Chatham blues and pinks. "If I'm calling Tom about a 1 carat blue, he'll be telling me about the long line I'm on. For halfs to three-quarters, they're here two days later." Chatham says he's had problems with greens being too unstable and his yellows: "Our hues are softer, and thus far we haven't found our market."
The differences illustrate a very big distinction between HPHT by Gemesis and Chatham, which use very different machines. Gemesis uses BARS chambers, rooms full of them. Chatham's machines are three stories tall, take 18 months to get on-line, and are thus far capable of only 500 carats per month apiece. Gemesis recently announced they will be supplying pinks and blues.
For CVD, supply is obviously only sufficient to supply one client at present. Bostonian's Alexandria Matossian says, "Supply is great in that we know exactly what we'll be getting down the road, certified and with serial numbers."
VALUE But Not Cheap
The bulk of lab-created diamond being fancy color, it's difficult to compare prices to mined. The range between (mined) orangey-yellow, yellowy-orange, and unmodified yellow, for example, can be well over 35 percent.
At wholesale, producers of lab-created yellows generally cite prices of a quarter of mined diamonds. Retailers agree, with caveats that discounts can be as little as a third for bigger, cleaner, more yellowy stones. For pinks and blues—because mined prices are so high for these rarer colors—discounts can run as high as 80 percent, and even 95 percent. A VS 1 carat intense blue could be $3,500 wholesale versus $100,000 for mined. A Polygon search for 1 carat vivid yellow radiants (mined) turned up six pieces at $7,700 to $13,000. Gemesis retailers identified eight stones at $3,350 to $4,400.
Retail pricing is a very different animal. Markups for created fancies occupy a much larger range from roughly 65 percent for price sensitive retailers to well over key at doors with significant marketing presences.
And for white CVD? "When we first discussed pricing for Apollo diamonds," says Alexandria Matossian of Bostonian Jewelers, "we were strongly of the opinion that they should be at a premium to mined, but the market is already beginning to valuate the product." The discount is roughly 15-20 percent less than mined diamonds, with the smaller, cleaner, whiter diamonds occupying most of the higher premiums.
A ROSE Is A Rose?
While just about everyone refers to mined fancy colors as "natural," notably the diamond industry seldom uses "natural" to describe extracted diamonds, preferring "mined." Conversely, producers of man-made stones, particularly Tom Chatham, who says he's put millions into "lab-created," tend to call extracted diamonds "natural." Bill Pearlman, on-line marketer of D.NEA diamonds calls extracted diamonds "natural," and his own "laboratory-created."
This seems strange, given the sometimes eco-dubious aspect of "mined," and the eco-friendly lab-created marketing story—not to mention the halo surrounding the word "natural." Renaissance Diamonds, for example, recently formed a strategic alliance with Earthshare, a group of green-minded organizations, and carries their logo on their product.
"Internally," says Apollo's Bryant Linares, "we refer to them as what they are: diamonds. From a marketing perspective, we agree strongly with consumer desire for clear understanding of origin. Apollo clearly states that our diamonds are grown or cultured by us in the U.S." Spokespeople for Gemesis, which recently cofounded a Cultured Diamond Foundation, tend to be fairly adamant about the use of "cultured."
GRADING Lab-Grown
EGL, IGI, and GIA offer grading reports for man-made diamonds, as do a handful of others. Stones are identified as "cultured," "laboratory-grown," or "synthetic," with laser inscription of identity mandatory on the girdles. DiamondSure and Diamond View technologies are widely used to aid identification.
EGL, Gemesis partners since 2004, publishes a book length text, Laboratory Created Diamonds. GIA, which has accepted man-made diamonds since January 2007, issues a "Synthetic Diamond Grading Report" but also uses the terms "laboratory grown" and "man-made" on the report. The top line of diamond reports by IGI, which has issued reports on synthetics since late 2006, is given to origin.
Both Chatham and Apollo grade and inscribe their diamonds internally, and have worked with labs to help with identification. Tom Chatham says he's "certainly felt no overwhelming need for outside reports," though he has GGs on staff who grade stones internally. "Apollo has been working closely with GIA to assist them in building their knowledge base in working with Apollo diamonds," says Bryant Linares. "For an additional fee, consumers can obtain GIA grading reports on diamonds purchased from Apollo."
author: BY IVAN SOLOTAROFF, SENIOR EDITOR - Modern Jeweler




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