After VR’s Shortcomings, Walmart’s Interest in Cube May Be a Boost

Xconomy Texas — 

San Antonio—Virtual reality has certainly been a hyped industry during the last few years, though it recently gathered a little backlash because of unfulfilled expectations and the recent failure of a Silicon Valley startup.

But a deal announced earlier this week indicates that the world’s largest company by revenue still believes in it. San Antonio-based VR equipment maker Merge says Walmart will sell its newest device, a foam square it calls the Merge Cube that works with augmented reality games. Walmart and other retailers have ordered more than 1 million of the Cubes, says Merge co-founder Andrew Trickett. The device is selling for about $15 at Walmart first, and other retailers starting in September.

Trickett declined to say how much Merge is charging retailers. Merge had previously started selling its first product, goggles that allow a smartphone user to use VR or augmented reality apps, at Walmart.

The news comes as VR and AR have been taking some heat for not quite measuring up yet to hefty expectations. Social media VR company AltspaceVR, based in Redwood City, CA, announced last week that it is shutting down its operations, which the company said was caused by a failed venture capital deal and the “general slowness of VR market growth.” AltSpaceVR said around 35,000 people used its product each month. Numerous publications reported that most VR companies, from Playstation to Oculus Rift, were seeing disappointing VR headset sales last year.

But that apparently hasn’t left the industry resigned to defeat, and the increasing interest of a large retailer like Walmart may show that it still sees broad consumer appeal. Research firm IDC still expects shipments of headset units to rise to around 91.7 million in 2020 from about 9.4 million in 2016. One thing that IDC says may help sales is the lowering cost of smartphones and VR technology. That’s exactly what Merge, which sells its headset for $59.99 and the new Cube for $14.99, is counting on: that it’s inexpensive enough for parents to buy it for their kids.

“When you look at that price point, it is deliberately designed to be an impulse purchase,” Trickett says. “We want it to be a really low-friction decision.”

The Cube, which has hieroglyphic-like designs that Trickett says are modeled after “ancient aliens,” is targeting kids interested in the augmented reality market and only works with games that use the company’s software development kit, which it released to developers in March. Since then, Merge has received 500 submissions from developers.

When a user looks at the Cube in his or her hand while running one of those games, it appears to resemble an object related to the game—maybe a castle or a puzzle or a planet in the solar system. The company made a website to list all of its games.

The VR-goggle wearing user can move the Cube around in their hand, giving them a feeling of tangibly affecting it, Trickett says. That feeling of touching an object and a low price point are what differentiates Merge’s tools from other more expensive, possibly higher-end VR devices, he argues.

Merge raised approximately $10.1 million in funding last year, according to a regulatory filing, and had previously raised about $3 million in a seed round. Trickett declined to comment on how much the company had raised in total but says Merge is always looking for new funding.

Until the Cube, Merge’s VR goggles—which have have a slit for a smartphone to slide into, and adjustable lenses for looking at the VR program on the screen of the phone—was the company’s only product. The Cube, as well as a hand-held controller that Merge also expects to release soon, may eventually become more important products to the business, however, especially as other headset technology advances, Trickett says.

Various other VR hardware makers are indeed pushing out sophisticated augmented reality headsets, such as Microsoft’s HoloLens, Avegant’s Light Field technology, and whatever the enigmatic Magic Leap is working on. Merge believes it doesn’t compete with those companies because it is targeting consumers who don’t want to pay much, especially parents looking for a VR device for their kids, which is part of what attracted Walmart, Tricket says.

Trickett says Walmart approached Merge about selling the Cube after seeing the VR company present a prototype of the device at CES in January, Trickett says. It will start selling in west coast stores, and move east. There’s been one hiccup so far: the device appeared to be sold out as of 6 p.m. Central Time on Aug. 3 on the Walmart website.

“I wouldn’t even say that it’s so much that we convinced them that we were going to sell 1 million (Cubes),” he says. “I think they convinced themselves a million could sell.”