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Diamonds may be losing their shine.
Retail sales of diamonds are slowing globally as a younger generation of consumers appears to be less attached to traditional diamond jewelry than their parents and grandparents, according to industry analysts.
"Millennial consumers have distinctive preferences, which in many ways diverge from previous generations," Bank of America Merrill Lynch analyst Ashley Wallace said in a research note this month. "They tend to be more value conscious, more concerned with sustainability and ethical production, and often value unique and individual products versus items that are standardized and mass-produced."
They are also marrying later. The median age for millennial women to marry is 27 and for men 29, according to Pew Research. That's a challenge for the diamond business.
The bridal category, including engagement or wedding ring purchases, represents as much as half of the total merchandise sold by some of the major U.S.-based jewelers.
And when they do marry, some consumers are opting for more gemstone engagement rings, such as sapphires, or fashion jewelry with lab-grown diamonds, according to industry analysts. Synthetic diamonds can cost 30 percent less than mined diamonds.
"Millennials don't want what all their friends have and don't want what they've been told to have," said Amanda Gizzi, a spokeswoman for Jewelers of America, a trade association with more than 8,000 member jewelers.
In an attempt to counteract the trend, the Diamond Producers Association, a global trade group of seven of the world's leading diamond producers, launched an advertising campaign to win over the hearts, minds and wallets of millennials. Its slogan is "real is rare, real is a diamond." This effort follows the relaunch last fall of the iconic "a diamond is forever" advertising by De Beers, the world's largest diamond marketer.
"The role of the DPA is to focus on ensuring a strong, vibrant demand for our diamonds," association CEO Jean-Marc Lieberherr said. "That's really what underpins the 'real is rare' strategy, which is to connect at a deep emotional level with millennials, who are an important group now. That's the biggest generation in the U.S. and within a few years they'll be the biggest consuming generation. They are also the generation getting married, and the bridal or kind of romantic engagement cachet is still the cornerstone of this industry."
Lieberherr added that millennials "really relate a lot to what a diamond is and the idea of a diamond, but a little less to all the rituals and conventions that are associated with it." He said the new marketing campaign includes social media well as radio and television.
"While the Diamond Producers Association has put the stimulation of demand growth high on its agenda, the challenge is that diamond jewelry appears to be low on the buying lists among so-called millennials," RBC Capital Markets analyst Des Kilalea said in a research note published this month.
BofAML estimates worldwide retail sales of diamonds will grow just 2 percent this year, well below the 7 percent compound annual growth rate from 2009-2014. The U.S. remains core to the diamond industry with an estimated 42 percent share of the global market for diamonds, according to DPA figures.
The U.S. market is actually what's helped maintain the overall worldwide growth rate in recent years. The Chinese and Indian markets, which were the strongest engines of growth from 2010 to 2014, have slowed.
Meanwhile, RBC expects diamond "supply will exceed demand until at least 2020." Also, their research suggests that the "growth in synthetics will become an even greater challenge to natural diamonds" in the future.
Synthetic diamonds are a small fraction of the total amount of diamonds sold today, said Edahn Golan, an independent diamond analyst based in Israel. He doesn't see the lab-grown diamonds as an immediate threat to the traditionally mined diamonds.
"When you propose to your girlfriend and want a symbol of your enduring love, the chance is you won't propose with a lab-grown diamond," said Golan. "Not a big sign of affection — kind of cold. They are not capturing the bridal market. The lab grown diamonds as it looks today … is a very good niche that fits fashion jewelry."
Lab-produced diamonds are primarily made in Malaysia, Singapore, China and Russia, although there are some U.S.-based companies such as California-based Diamond Foundry, a company backed by Silicon Valley investors and actor Leonardo DiCaprio, whose movies include the 2006 film "Blood Diamond."
About 50 percent of the Signet Jewelers' total merchandise sales are tied to the bridal category. Company spokesman David Bouffard said the jeweler does not carry synthetics because "current research has shown that our consumers significantly prefer natural diamonds in fine jewelry."
Josh Holland, a spokesman for Blue Nile, said the online diamond jeweler has no plans to sell lab-grown diamonds but is "looking at them and evaluating what the market might be."