In late 2021 a power squeeze in China did something the lab grown sector had not seen before. It made supply the problem rather than demand.
The fall in production may lead to rising in prices.
What the shortage looked like at the time
China was producing roughly three of the seven million carats made worldwide each year, so a cut of 10 to 15 per cent in jewellery grade output was not a local event. The expectation across the trade was that prices would firm.
What actually happened to lab grown diamond production next
They did not. Capacity in both China and India kept expanding, and lab grown diamond production outran demand by a wide margin. Wholesale prices fell sharply over the following two years, and by the middle of the decade a lab grown stone sold for a fraction of what the same specification fetched in 2021. The 2021 squeeze turned out to be a pause in a long decline rather than a turning point.
Why that history matters for a Canadian retailer
It is the clearest lesson available about what happens to a product with no supply constraint. A natural diamond has a finite source. A grown stone has a factory, and factories can be built. Any retailer setting a pricing policy on the assumption that today wholesale cost is a floor is making a bet that the last few years argue against. Holding deep inventory in a falling market is how margin disappears quietly.
How to position it honestly
Sell the category as what it is, which is a larger stone for a given budget, and be straightforward that resale value is not part of the proposition. The retailers who get into trouble are the ones who let a customer believe otherwise. Disclosure in writing on the invoice protects the store as much as the buyer. More on the category is in our news coverage.
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