Applied Marketing 101 Surviving the Collapse of Bridal Price Points

By George Prout

The Lab Grown Diamond (LGD) Disruption is now entering the third phase of what I believe will be seven predictable discrete mini epochs in the evolution of LGD en route to becoming a mature product category. Each phase will open new opportunities for both suppliers and retailers, but each will also likely create turmoil as well as financial turbulence. Over time, we will see an ever-increasing emphasis on higher price point fashion as LGD recreates the diamond jewelry business, but for now, we are still witnessing a narrow collective focus on bridal applications. And since this particular phase inevitably involves a collapse in Average Unit Retail (AUR) prices in bridal, I’m writing to make some suggestions, both to help you to weather the storm, as well as to maximize the benefits that this opportunity provides. But first, let’s look at what’s happening, and why.

Last fall we saw the beginning of the Darwinistic cleansing of the LGD supply chain, as dealers, both large and small, reacted to the precipitous decline in LGD prices by dumping goods, which served only to hasten the decline in prices. In turn, this caused aggregated AUR in engagement rings to begin to collapse, a trend that has now accelerated in 2023 to the extent that the Edge Retail Academy reports a spectacular 30 percent decline so far this year. The collapse has been so severe for some that I have heard whispers that certain retailers are even considering dropping lab altogether, in hopes that they can somehow re-energize their mined business by not offering the lab grown counterpart.

This strategy strikes me as analogous to Verizon or AT&T choosing to opt out of cell phone sales twenty-five years ago because it was killing their landline business. Obviously, that choice would have been catastrophic.

George Prout

Sadly, for industry purists, the LGD genie is out of the bottle, and the notion that one can successfully survive as a niche player selling only mined centers strikes me as impossible, unless you’re one of many retailers in a high-density population market. Furthermore, the choice to go “mined-only” leaves you incredibly vulnerable to a competitor with a well-developed LGD revenue stream who can simply sell mined diamonds at cost until you’re forced to abandon that segment of the business. Want to spend the rest of your career completely out of the bridal business? I suspect not.

Fortunately, there are answers to the strategic challenge posed by the decline you’re experiencing in bridal AUR. Here are a few of the most powerful options:

1. Go Big

There is absolutely no reason for your bridal AUR to collapse, provided that the size of the diamonds you’re selling increases proportionately to offset the decline that’s occurring in price. The problem you’re experiencing has as its core cause the fact that perceptually, mainstream consumers are unaccustomed to seeing 4 and 5-carat centers on their friends’ hands. Yet the hyper-affluent consumers in the 60s who shopped at Tiffany and Harry Winston had no problem purchasing engagement rings containing large diamonds. As an aside, can you imagine Elizabeth Taylor complaining that a 4-carat diamond was too big? Yet I know that you are hearing young women saying that a particular diamond is just too big for their hands.

Fortunately, there is a simple solution to this problem that can be found in the neurophysiological paradigm that humans (as well as all higher order primates) evaluate objects not in terms of their actual size, but rather in terms of their relative size. Want to sell her a 3-carat? Show her a 4-carat. Want to sell her a 4-carat? Show her a 5-carat. Simply show her a large size that she can reject as being too large, so that she

Please see Prout page 22

Why

We use Zillion, one of The Edge’s partners, for insurance. The whole point of Zillion is to get the customer easily insured before they leave the store. So it’s really good customer service. It’s also good for us, because they’re insured and if something happens they’ll come back to us.

We’re really busy and business is really good. In the big scheme of things, things are awesome here.

- Jeff Guntzviller, General Manager, Miner’s North Jewelers, Traverse City, MI