SHANGHAI (Reuters) -As Chinese shoppers dip toes back in the luxury pool, brands are targeting economically resilient high-earners with distinctive, personalised experiences as their focus shifts more to market share than growth.

Firms like LVMH and Hermes increasingly offer intimate dinners and large-scale shows, as well as stores with private shopping areas and exclusive elevator access for the VIPs they bet will help end a post-pandemic sales slump.

Luxury brands have accompanied earnings reports with comments offering glimmers of hope for Chinese retail, spurring a rally that has added nearly $80 billion to European luxury stock valuations. Still, few expect the sales surge of the pandemic years, and with U.S. policies rewriting global trade, China's economic trajectory is far from certain.

James Macdonald, head of Savills research for China, said luxury firms have shifted from "rapid expansion to improving sales per store and deepening engagement".

"Rather than waiting for the economy to lift demand, brands are creating their own recovery by highlighting value and delivering richer, more immersive experiences," Macdonald said.

Brands have flocked to Nanjing Deji Plaza, China's top-performing mall in 2024 with sales of 24.5 billion yuan ($3.4 billion).

Nanjing's only mall with the likes of Hermes, Chanel, Dior and LVMH's Louis Vuitton under one roof is better known for mirror-clad bathrooms that have gone viral.

In August, Louis Vuitton chose the mall as the first China stop in its entry into beauty with its La Beaute line, which raised eyebrows for its $160 lipstick.

CHINA'S SHARE OF LUXURY SALES AROUND 22% AFTER PEAK OF 33%

Some brands said while there are signs of spending growth, there will be no return to the heyday when pandemic-era travel curbs kept spending in mainland China.

"I think that the worst is over, but I don't think that we will ever see again in the near future what we have seen in the last decade," Prada CEO Andrea Guerra said in an earnings briefing.

The proportion of luxury goods sold to mainland Chinese consumers is around 22% from a peak of one-third, showed data from consultancy Bain & Co.

To encourage spending, perks such as intimate dinners with creative directors and celebrity ambassadors have become common.

However, the June opening of Louis Vuitton's massive ship-shaped store, dubbed The Louis, is the most eye-catching example of the lengths to which brands are going to stimulate consumption with out-of-the-ordinary experiences.

Combining high-end retail with eateries and exhibition space, the Louis not only outperforms other Louis Vuitton flagships by daily sales, but 60% of its revenue comes from new clients, said Zino Helmlinger, head of China retail at property services firm CBRE.

"Luxury brands' executives, they're going to The Louis several times and taking notes," Helmlinger said. "They all want their own Louis. They are forced to transform, or you're just heading toward disappearance."

    Louis Vuitton's China sales rose 5% in August versus the same month a year earlier, said two people with knowledge of the business, declining to be identified as they were not authorised to speak with media.

Both said the business' goal this year is to ensure sales do not fall. Last year, the overall mainland China market declined as much as 20%, Bain estimated.

LVMH and Louis Vuitton did not respond to requests for comment.

STOCK MARKET RALLY IS GIVING WEALTHY CONFIDENCE TO SPEND

While the global economy has been upended by the U.S. trade war, in China economic fundamentals are fragile and data from the Golden Week holiday showed per-capita spending below pre-pandemic levels.

Still, earnings point to optimism, helped by comparisons to dismal year-earlier figures, favourable exchange rates and a domestic stock rally.

LVMH said China sales "turned positive" in its most recent quarter. L'Oreal said the market has "gone into positive territory" and Hermes enjoyed "very slight improvement".

"It's good news. Maybe too early to really declare victory, but it's a good sign," said Bruno Lannes, senior partner at Bain in Shanghai. The sustainability of the stock rally could also be a wild card, he said.

"Especially for the target customers of luxury, you can expect that those people probably have a retail equity account, so they are seeing the benefits of the stock market rising and feeling more confident to spend more."

Sophia Liu, CEO of an education company, recently splurged on a Burberry coat, Fendi scarf and Louis Vuitton products in her favourite colours, pink and purple. She said, though there is ample economic and geopolitical uncertainty, that is having less of an impact on big spending decisions.

"I think people in China have gotten more used to uncertainty overall," she said. "A lot of my friends work in the technology industry, and their companies have gone IPO. So, mostly I feel people around me are more positive at the moment."

Luxury brands that invested during the downturn are likely to win market share as spending stabilises, even if revenue does not significantly grow, said Jacques Roizen, managing director of China consulting at Digital Luxury Group.

    "In a market that is now basically flat, brand performance will no longer be fuelled by overall market growth," Roizen said. "Those that succeed now will do so by gaining market share from others via optimisation and innovation."

($1 = 7.1230 Chinese yuan renminbi)