Virtual reality (VR) arcades are cropping up in shopping malls and even apartments.

Some arcade operators are developing and testing their own games.

Headset choices are limited despite booming production.

China has a well-documented fascination with VR, and while top-of-the-line headsets are still too pricey for average consumers, VR arcades are cropping up to fill the gap. A quick look at popular group buying site Dazhong Dianping shows that Shanghai is now home to at least 25 virtual reality arcades, with more opening every month.

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According to Yunyu Zhang, a 21-year-old customer at Chuyu VR Cafe, VR technology is no longer a novelty for consumers. She’s visiting the cafe for the fourth time herself already.

“When I experienced VR for the first time, I was very frightened, but it was also very fun,” she says. “I think it’s worth coming to a VR arcade to play VR games. I’m even thinking of buying one and playing at home.”

Yunyu came to the VR arcade with two friends, and when she’s not playing she laughs at a friend who is walking through a virtual haunted house. Yunyu tells her friend to open the drawer and take out a flashlight, and giggles when he accidentally drops the bottle in his hand.

“The person who is experiencing VR is having fun, but for the people observing it is even more entertaining,” Lan Chunru, the founder of Chuyu VR Cafe tells TechNode.

Mr. Lan has placed a large screen in front of the VR player areas, adding a new dimension of entertainment for spectators who want to watch friends or strangers react to VR experiences.

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Mr. Lan says his VR arcade is fast becoming a meeting point for students from five different universities in the area, but he says he’s had customers as young as four and as old as seventy.

“We earn about RMB 50,000 (USD$7,500) a month,” Mr. Lan says. “Considering the price of the apartment is RMB 15,000 per month, the VR arcade is a good business.”

China is a country of early adopters, and the VR industry is no different. A burgeoning middle class of young, tech-savvy Chinese people is tapping into the country’s appetite for immersive experiences. After graduating university, Mr. Lan started this business with a friend. Now 25, he runs a 363 square-meter space with three rooms equipped with HTC Vive VR headsets.

“I knew [about] VR when it was not really popular. In the year 2008, when I was in the high school, I saw the term ‘Virtual Reality’ in a textbook. It was when the sci-fi books and films were popular in China, and I thought it would be cool if I [could] travel to the other worlds through VR,” he says.

“At the start of this year, I encountered virtual reality in tech conferences. I decided to open a VR arcade on my own.”

Another young VR arcade founder, Charles Zhang, is a 30-year-old working at Hutchison Whampoa, a Fortune 500 company listed on the Hong Kong Stock Exchange. Leveraging the flexibility of his work as a salesperson, he started his own Shanghai VR arcade in this May.

“This is year one for virtual reality. During the weekdays, people mostly visit us in the evening. On the weekends, it’s really packed,” Mr. Zhang says.

“Many people want to experience virtual reality instead of drinking just a cup of coffee. Men like a haunted house, and zombie games, while women prefer magic house types. Children like watching the simulation of sceneries.”

A player has a limit of 30-minutes a turn, says Mr. Zhang, and is not permitted to play a second time. This brings back users to the store and back to reality.

“About 60 percent of the customers come back to experience other VR games. Mostly, they bring other friends with them,” he says. “Our sales [are] going up 30 percent every month, but I believe the market will saturate at some point.”

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Feng Xing, a 38-year-old mother brought her two kids to Charles’ VR arcade to experience VR for the first time. “I first saw my friend [post] it on the WeChat Moments [a Chinese social media service]. I easily found the VR arcade [near] my house using Dazhong Dianping.”

Her two sons tried out VR first, then Xing tries it for herself. After the 30 minute VR experience was over, she says the run time is “too short,” and she’s keen to return.

“For my kids, I think it’s [a] more a healthy experience as a game. The smartphone screen is too small, but this VR headset is comfortable” she says.

VR Headset Production Is Booming In China, But The Choices Are Still Limited

Despite the fact that there are hundreds of companies developing VR headsets in China, the selection pool for VR arcades is still limited to just a few companies. Chunyu VR Cafe is equipped with HTC Vive and 3Glasses. Mr. Zhang’s VR cafe uses HTC Vive exclusively.

“In my opinion, HTC Vive is [the] high-end, Oculus and Samsung Gear come in the middle, and many Chinese headsets [are] still on the low-end,” Mr. Zhang says. “LeEco and Baofeng wanted to give us VR headsets for free. But I refused, and we now only have HTC Vive. I want to provide the highest quality experience to our customers.”

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“In China, we cannot get Oculus in a legal way. As for Samsung Gear, it doesn’t [work] with the computer, and [is] restricted to phones,” Yang Jinxi, the founder and CEO of FAMIKU told TechNode.

FAMIKU is a Shanghai-based online game developer for arcade machines. They opened their own brand of VR arcade in this July. The 2,314 m2 space is located on the top floor of a shopping mall in Qibao, west Shanghai. It features 30 different games with interactive arcade machines, including mobile arm chairs for amusement park simulations, toy revolvers for shooter games, and chairs equipped with handles for tank driving simulations.

The VR arcade has headsets from HTC Vive, Deepoon, and Oculus, but Mr. Yang plans to change all the headsets to HTC.

“Since we develop VR game content ourselves, it’s also good to keep the standard based on a single VR headset.”

China’s VR Arcades Are Becoming A Testbed For Overseas VR Games

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“Not many parents can afford to take their child to the amusement park 10 times per year, but VR can make a child feel like they are at the amusement park,” Mr. Yang says.

Most of the games in the FAMIKU VR arcade are made by the company. One of the most popular games in is a Mount Everest game. As the user steps onto a rope walkway with a VR headset on, an assistant works a fan and shakes the ladder. In the VR simulation, the viewer traverses the rickety bridge between two snow-covered cliffs. Mr. Yang says many people come to experience the Everest game to cure their fear of heights.

Other games are downloaded from Steam, a highly-popular digital distribution platform for games. “Steam is not suitable for offline operations because the running time is too long. It often goes over 20 minutes or even an hour to play a game because they are designed for the home use,” Mr. Yang says. “That’s why we develop [the content] by ourselves. We control the run time of the game, so that it doesn’t go over 10 minutes.”

The company plans to collaborate with game studios from other countries as well as develop their own VR content. They are now working with Europe-based Directive and Japan-based Gumi. The overseas game studios submit 20 sample games to FAMIKU, and if it tests well with users, the arcade downloads the game for regular use.

Some VR arcades take advantage of domestic VR content providers to get their business off the ground. Wasai VR arcade partnered with Beijing-based Wasai, a listed VR content-creating company listed on the New Third Board, to use their VR game content at cut rates.

Chinese VR Arcades Face Challenges, Despite Enthusiasm

Arcades still face some serious issues in Shanghai. It’s absolutely vital to ensure the user’s first experience with VR is a good one if the arcades are to attract word-of-mouth attention. When a customer visits an arcade in Shanghai, an assistant is often stationed beside them to spot any problems early, or even help them turn their body or head to see a scene they would otherwise miss.

A bigger longterm issue is the availability of multiplayer games. Most of the VR arcade owners and customers complain about the fact that they cannot play with other people. “When customers come to visit us, they want to experience it together with their friends. That’s one of the issues we have at the moment,” Mr. Zhang said.

VR arcades are still a costly venture too. Along with high rent prices in Shanghai, VR arcades need to spend heavily on headsets and content.

“We bought these HTC Vive headsets for over $749 [each], but later the price of these VR headsets will go down. In this fast developing VR market, the early owners will have to pay the high cost,” Mr. Lan says.

This story originally appeared on TechNode.