Diamonds are gorgeous and rare gemstones, but their practical uses are somewhat limited. You could argue that diamonds are helpful for the purpose of making drill bits. However, those aren’t the types of diamonds you can find in a retail jewelry store.
Since diamond jewelry isn’t a functional nor practical gift, why do people buy diamond jewelry then? Why are diamonds in high demand?
Interestingly enough, diamond supply is being maintained in a way that fosters the illusion that they’re much rearer than they are. That creates the high value of the diamond and thus its high demand.
Furthermore, there are also some psychological reasons as to why some people explicitly buy diamond jewelry. In this article, we’ve covered all of these reasons in detail – so without further ado, let’s dive in!
Psychological Reasons Why People Buy Diamonds
The qualities that make diamonds crucial in the industrial sector – such as durability and clarity – are symbolic in the jewelry world, especially when diamonds are gifted.
The value of diamonds’ longevity might influence a buyer’s decision. For instance, the diamond jewelry people select to symbolize their relationships is usually an expression of everlasting love or the ability to withstand hardships along with the good.
When it comes to consumer purchases, desires rule over needs. The reason why a costly item, such as a diamond necklace, is purchased is usually a combination of psychological, economic, and cultural factors.
For diamond sellers, that means that the sales are made when they understand the interaction of buyers’ motivation and emotion. Once the basis for the particular purchase has been figured out, the diamond seller needs to target the emotional aspect of that motivation, too.
Now, the motivation could be romantic – between two loved ones – a reward for an achievement such as graduation or promotion or a way to boost someone’s happiness after some hardships.
Due to the fact that customers attach emotions to luxury purchases, the seller must understand what the feelings behind motivation are so they can guide the customer in the best possible way to purchase for their needs.
Brent McFarran, in one of his studies, grouped luxury consumers into two groups – consumers that use pride as a reason to buy luxury items and consumers that buy luxury items in order to feel pride.
In either case, a customer may be influenced by pride – and both types of sentiments could be utilized to drive a sale. With that said, here are nine key motivators for diamond sellers to look out for when aiding their customers to purchase diamond jewelry.
1. I’m Worth It
- Right or wrong, some people measure their self-worth by the quality and size of the diamond jewelry they receive. That can also be applied to the value and the quality of diamond jewelry that someone bought for themselves. Considering the individual’s budget, more often than not, their purchase reflects the degree to which they believe they deserve something expensive, like diamond jewelry.
2. Let’s Celebrate
- When there’s a special event to be celebrated, the primal nature of the diamond jewelry given reflects the joy and importance of the occasion. That could be the celebration of a couples wedding anniversary or the birth of a child, marked by the father gifting the diamond jewelry to the mother.
3. I Did It
- Either in recognition of someone else’s or one’s own accomplishments, diamond jewelry is an excellent choice after overcoming challenging times and achieving something significant. For instance, promotion or graduation are great motivators for purchasing diamond jewelry.
4. I Want Something Truly Special
- The rarity of a diamond and its combination of the 4C’s, make them one-of-a-kind gemstones. In that sense, gifting a diamond to a loved one can be an expression of this uniqueness.
5. Reflecting A Diamond’s Qualities
- Some might choose to purchase diamond jewelry for themselves – and others – to express that individual’s distinctive and radiant personality. Other qualities that can also be reflected are inner strength, sparkle, fire, and reliability.
6. Making The Right Impression
- Generally speaking, when it comes to gifting diamond jewelry, this one is a male motivation, but women can also purchase diamond jewelry for the same reason: A diamond ring or a bracelet can show how much you care for someone.
7. The Promise Of A Diamond
- It’s that moment when a man realizes that today is his wedding anniversary and he doesn’t have a gift for his wife yet. Only a luxurious gift could redeem him – and diamond jewelry is usually the go-to answer. Displaying how invested he is in her happiness can show that she’s at the top of his mind. If you don’t know what to get for your wife, you can’t go wrong with a diamond.
- Saying “Sorry” or needing to express how important a person is to you could also be done with diamond jewelry. The symbolism of a diamond as a gemstone that latest forever appeals to this motivation.
9. Purely A Gift
- As diamonds transcend function, gifting diamond jewelry means expecting nothing in return. Giving a diamond to your loved one instead of some “practical” item can show how much you appreciate that person – simply for being who they are.
Related Read: Why Do We Wear Diamond?
What Makes Diamonds So Valuable?
The answer to this question is simple – market rules of demand and supply. For centuries, diamonds have been a sign of wealth, status, and power. The stone was believed to be rare – and, thus, it was worth more.
However, in the 1800s, a diamond trove was revealed in Kimberley, South Africa. The newfound diamond mine had the potential to overflood the market with diamonds – thus bringing down the cost of the precious stone.
De Beers quickly intervened, bought the mine, and maintained control over the global diamond supply to prevent too many diamonds from coming to the market.
But here’s the thing: De Beers still released enough diamonds to meet annual demand, giving the illusion that these gemstones are exceedingly rare. In turn, the seemingly limited supply of diamonds inflated their cost.
Throughout the 19th century, De Beers maintained a monopoly on the global diamond mines – the company would stockpile stones, limit the supply, and drive up demand and prices.
De Beers also began a marketing campaign to promote diamond engagement rings. The brand pushed out the tradition of sapphire and ruby engagement rings and replaced them with a great demand for diamond rings.
This demand, combined with De-Beers-controlled diamond supply, increased the overall price of the stone – an effect that remains till this day.
Understanding Diamond Prices
Diamond pricing is determined by suppliers and diamond cutters – besides the general supply and demand conditions.
In fact, the pricing process starts from the diamond mines. As diamonds are found in their rough form, they’re sold to diamond manufacturers at auctions known as sights. The buyers are diamond producers known as sight holders – and right now, there are 79 sight holder diamond-producing companies.
At various points during the year, sight-holders attend diamond auctions, purchasing the rough diamonds – this is the first time a price is determined for a particular gem.
The diamond manufacturing princess isn’t a cheap one. Diamond producers must deploy skillful labor and technology to precisely cut and polish these rough diamonds.
Now, one would think that manufacturers set diamond prices here. However, that’s not exactly the case:
To standardize and regulate the pricing of diamonds, an organization named Rapaport aids in moderating diamond pricing. This organization meets with rough diamond suppliers, producers, and retailers to decide the supply and demand conditions.
The Rapaport sets suggested wholesale diamond prices based on these conditions that include all combinations of color, clarity, and carat. That report is known as the Rapaport price list, and it’s updated and published weekly.
From this point, diamond manufacturers provide pricing for the diamonds they distribute to the market. These prices are often a discount or premium to the wholesale pricing suggestions, as supplied by the above price list.
Diamond pricing has become somewhat competitive since the standardization issued but the GIA. Therefore, it’s important to mention that the average diamond margin is around 7%-12%.
Polished Diamonds And The Value Chain
Diamonds increase dramatically in value as they go through processing, from manufacturing to retail. In 2019, for instance, the sales value of rough diamonds totaled $13.9 billion worldwide – but after polishing, the prices skyrocketed to almost double, reaching $26.7 billion.
Here’s another mind-blowing fact: In 2019, the global diamond jewelry market’s value was estimated to be worth around $79 billion. Almost half of the world’s demand for polished diamonds comes from the US, with a 48% share of global market demand.
Industrial Diamonds: Less Gorgeous But Highly Utilitarian
Diamonds have high industrial value, too – they’re generally regarded as an excellent material for grinding and cutting tools because of their extreme hardness.
Approximately half of all mined diamonds aren’t of gemstone quality; thus, they are utilized for industrial purposes. However, today, the vast industrial demand for diamonds is in most cases satisfied by lab-grown diamonds.
Moreover, these lab-grown diamonds are seeing increased use in jewelry as the less expensive – and ethical – alternative to natural diamonds.
Dominant Companies Of The Diamond Industry
The global diamond mining industry is, in fact, dominated mainly by a couple of companies.
Among them, the top three are the already-mentioned De Beers from Luxemburg, Alrosa from Russia, and British-Australian Rio Tinto. These account for more than 60% of global diamond mine production.
Natural mined diamonds are commonly processed and sold through the major global diamond centers, including Dubai, Antwerp, New York, Hong Kong, Tel-Aviv, and Mumbai.
There’s no universal price per carat of diamonds. Nonetheless, global diamond prices have increased more than ten times since 1960, reaching the price points we see today.
Diamond Pricing Value Tips
Before we wrap things up, here are our tips for finding the best value-for-money in any diamond price range:
- Consider Fancy Shapes: They’re pretty fashionable, symbolic, and generally 10% less expensive than the round brilliant cut.
- Buy Online: Apart from the massive collection, online jewelry stores cut out additional supply chain layers like retailers and brokers. That could reduce the price quite a bit.
- Size Down: Try to find stones just below the target carat size. For instance, if you want to get a 1-carat diamond, try to find a 0.90 or 0.95-carat diamond. The difference in size is almost unnoticeable, but the cost difference can be pretty big.
- Perfect Has Its Price: You don’t need a D color and IF clarity diamond. The clarity and color grades differences are relatively small, but the price differences can be substantial. Balance the 4C’s to achieve value.
- Buy Loose Diamonds: If you want to work with your local jeweler on a specific ring setting, consider buying the stone somewhere else. Sometimes the package deal is more expensive than the individual components.
- Price Compare: Many jewelry stores offer diamond price matching. If you can find the exact stone report somewhere else, they’ll match the best possible price.
So, to recap, why are diamonds in high demand? The answer to this question can be rather complex – but let’s break it down for you:
The first reason diamonds are in high demand is that their supply is being controlled, creating this false image that they’re much rearer than they actually are.
Sure, diamonds are still pretty rare, don’t get us wrong. However, by controlling their supply, big companies can inflate the value of the diamond – and make more profit out of them.
In addition, diamonds are one of the most gorgeous-looking gemstones, and with a higher price tag, they’re bound to attract luxury lovers. Motives for purchasing diamonds are numerous, from showing one’s self-worth to being purely a gift.
We’d say that sums it up!
Related Read: Why Diamonds Are So Popular?