These days, diamonds aren’t hard to come by. In fact, they are the most common stones compared to all other precious gemstones. They are so common that they barely have any resale value.
So you wouldn’t help but wonder why they have such enormous price tags. Even without the element of rarity, diamonds are the most expensive gemstones on the market.
A lot of factors make diamonds expensive, from the process of their extraction to the marketing strategies used in advertising them.
In this post, we will share most of these reasons in-depth and all the other important information you need to know about diamonds. Read on!
Why are diamonds expensive when they are not rare?
1. The marketing strategy
It goes back to when diamonds were first discovered in South Africa in 1870. One of the farms where diamonds were detected belonged to the De Beers which gave rise to De Beers commercial mining company.
The discovery of the new mines arose fear among the European financers since it meant an increase in supply hence that would reduce the value of the gem.
To counter this challenge De Beers, in 1888 started to control the production and distribution of the diamonds thus creating the illusion of scarcity in the market.
No arrangement has surpassed the success of that used by De Beers in the history of modern commerce.
To ensure that the diamonds did not lose value even as their production enhanced, they gave purpose to diamonds that would increase their demand forever.
The genius idea ensured that the demand would not be affected by the economy.
Initially, diamonds were luxury jewelry that was worn on special occasions like galas and if not, they were only ever spotted on wealthy people. In 1930, there was a depression and they were not purchased as much as they had been earlier.
So De Beers figured out a way to make diamonds a necessity so that their uses would not depreciate with time.
To do this they approached an advertising company that took away the mentality that diamonds were a luxury and chipped in an emotional connection to them.
The advertising company started the campaign A Diamond is Forever. The campaign made diamonds in engagement rings a symbol of love and romance.
They were associated with true eternal love and society accepted it and made it the main purpose of purchasing the gems. So the main reason why diamonds are expensive is the genius minds of those who marketed them.
Though three other top diamond producers in the world have emerged other than De Beers, it is all thanks to them that diamonds are doing so well despite being plentiful.
2. Market Manipulation
Though De Beers eventually gave purpose to diamonds it was a hard struggle to get to that. One nagging question is did people just naturally fall in love with diamonds or were they told to love them?
The answer is simple, De Beers gave everyone a reason to love diamonds and they rolled with it. However, that did not happen overnight. Though the results of the marketing strategy still prove to be fruitful, De Beers tried other techniques that yielded fruits in the way they least expected.
When they discovered that the mine in South Africa would create a vast supply of diamonds they hopped onto the first solution that came their way.
Since they were the only diamond company then, the monopoly worked in their favor and they hoarded the diamonds.
They ensured they were scarce in the market and the prices were hiked such that only the wealthy people could afford them.
Though this arrangement was dropped when other diamond companies came up, it impacted the industry so much that diamond was held in high regard and it became expensive despite its surplus availability.
It’s no wonder De Beers is still a legendary name where diamonds are concerned.
3. The cost of mining diamonds
Though this factor has been shadowed by the contribution of De Beers in the world of diamonds, it is still an important reason why diamonds are expensive.
The dollars start counting during the process of looking for diamond sites. Discovering the diamond mines require conducting various tests and once a potential mine is spotted the cost of all the tested locations, whether successful or not, counts.
Once the site is marked, an additional cost is incurred in case there were residents in the area since they have to be relocated and compensated.
Also, huge machines are required to dig the diamonds from the ground. It is only on rare occasions that diamonds are found lying shallow beneath the ground, most of the time they are located deep under the ground.
Heavy machines dig tunnels on the ground for days or even months to reach the diamonds. For this process to be successful a lot of human resources are put in place, and scientific and engineering knowledge come in handy which adds numbers to the already rising dollar count.
To obtain a single ore of diamond, engineers, lawyers, scientists, prospecting teams and contractors would have to contribute their skills to make it happen.
This much work would be a waste if the diamonds were sold cheaply. The final price of diamonds, therefore, has to reflect the effort and everyone involved in the mining process has to earn a profit from the final sale.
4. Exclusive diamond companies
These days, people buy the name more than the actual product. A good example is in the clothing industry, there are comfy and high-quality clothes but just because they are not from huge brands, people skip them for options like Louis Vuitton and Versace which are way too expensive.
The same applies to diamonds. There are big brand retailers whose diamonds have been worn by celebrities on the red carpet and whose diamond engagement rings have adorned the fingers of some of the most influential people in the world.
This automatically makes them the to-go-to places for these gems despite the high dollar amounts they charge. Such retailers use the influence in their favor to make their diamonds stand out over the rest.
Since diamonds are naturally occurring, no two diamonds are alike. However, It is not like they are offering more valuable diamonds or rare ones, you could easily get a diamond with the same value as the one they have at a way lower price.
The high price tag is because you are not only paying for the diamond but the name as well.
Most people believe that if the diamond is not from a renowned retailer then it is either fake or just not good enough. More value is given to diamonds from retailers who dress celebrities and royalties which overall makes diamonds expensive.
5. The labor within the intermediaries
Mining is just the first process in getting the diamonds ready for the market. After the ore is obtained it is cleaned, cut, and shined. At this point, it still looks nothing like the diamond we fall in love with at jewelry displays.
It is mostly still in its natural form and is referred to as a rough diamond. It is then sent to diamond cutters who use computers and advanced machinery to cut it into shapes. This shrinks the original diamond significantly and it is polished to enhance its brilliance.
From this point, it is just diamond pieces that have not been given meaning. They then go to jewelers who employ their craftsmanship and embed the diamonds on necklaces, earrings, crowns, rings, and many other forms of jewelry.
It does not end here, the final product is brought to the market but is still passed down through salesmen until they end up in possession of the consumer.
The chain is long and the price increases from the moment the miners pull the ore from the ground to the time a piece of diamond jewelry is bought by its final owner. This is also part of the reason why diamonds have a low resale value.
Part of their actual value lies in the chain and when this chain is broken it messes up everything. The price of diamonds increases considerably depending on the amount of work that goes into delivering the final product.
6. The durability
Diamond is the hardest mineral in the world. And though its use as a piece of jewelry has been faced with financial depression, it is still outstanding and valuable industrial-wise.
Diamonds that are used for jewelry are mostly of color and clarity. Diamond is so hard that it is almost impossible to scratch let alone break. This property sets it aside from other gemstones and significantly makes it pricier.
Due to its hardness diamond is used to make machines that drill, grind and cut materials. It is especially useful when making mining machines or cutting other metals in big industries.
They are crushed into abrasive powders and then embedded into blades and grinding wheels. Compared to gem diamonds, industrial diamonds are mostly characterized by heat conductivity and not brilliance or size. Most of the gem diamonds that cannot be cut for jewelry are taken for industrial use.
Diamond was given a 10 on the Mohs hardness scale. Just like intimacy became a reason for gem diamonds to be purchased as the stone in engagement rings, hardness is the reason why industrial diamonds are expensive.
As long their demand for this purpose is still on the rise, diamonds will continue to be expensive no matter how plenty they are.
7. The demand for diamonds is high
The diamond business, just like any other business, faces fluctuations. When multiple mining companies joined De Beers, they mostly sold diamonds in the United States and Europe.
This meant the market was small while the production was high. Therefore, diamonds became plenty in the market and risked losing their value.
As time went by markets in China and India opened up and the supply and demand for diamonds stabilized. As expected the demand went on to increase as diamonds continued to gain popularity.
This created a business gap and more diamond mining companies joined the scene. These constant fluctuations went on and on until diamonds became common such that anybody with the right amount of money could purchase them.
This situation gave rise to competition in the diamond industry and it started to shrink. Venturing into the diamond business has since become a risky move because any mistake can lead to financial losses bad enough to cause the closure of the business.
Hence there are only a few mining companies, retailers, and manufacturers who are left in the industry. Many diamond mines are also starting to exhaust their productive life which further causes a reduction in supply.
Despite the many challenges that diamond producers and retailers face, the demand is constantly high if not increasing. This significantly changes the game and makes diamonds expensive. It is all a matter of supply and demand.
Conclusion
Diamonds might not be rare but their value was preset way before they became everyone’s favorite gem.
They are expensive gemstones because of the work that goes into putting them on the market and the purpose for purchasing them that was put in place by the very first diamond mining company.
Diamonds have become symbols of eternal love and that is priceless hence the huge price tag they have.
If diamonds weren’t used as jewelry they would still be expensive since they have industrial uses that make them irreplaceable.
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Stephanie is a jewelry lover when she was a teenager. Her major was fashion design when she was in college. She is a jewelry designer at SOQ Jewelry and other design companies. Now she is also a writer for our website. She writes a lot of designs&brands posts with very actionable tips.