The number of "Uber for X" startups is exploding as the on-demand economy for goods and services delivered to one's door almost immediately continues to grow.
But while there may be tons of venture capital money floating around to boost this rise, the growth inherently creates a critical challenge for all of the startups involved -- retention. Whether an on-demand startup is delivering food on-demand or sending a manicurist on-demand, they all struggle to retain users.
The typical on-demand startup has to convince a consumer with seemingly unlimited options that they should stick with just one option. And the more the on-demand economy grows, the harder it is to stand out and win the loyalty of customers.
During a panel about the on-demand economy at the Streetfight Summit, three on-demand startup executives were asked about the best way to make money in on-demand. Toby Hervey, the VP of Expansion at Pager, an on-demand startup that connects users with doctors within hours, said that one of the most important ways to make money in on-demand is to "retain your users." That was a lesson he learned from Homejoy, a cleaning startup that shut down in July after succumbing to growth and revenue challenges.
Homejoy had been offering a special deal for new time users, but the problem was that after cashing in on the discount, they never returned. "Retention was clearly bad, and that's what killed us," a former Homejoy employee told Forbes.
As startups like Homejoy, Handy -- which provides on-demand home cleaners and handymen - -and Priv -- which sends a salon stylist to your home --struggle to solve the retention problem, Amazon (AMZN - Get Report) has the ability to swoop in worry-free.
It's no surprise that Amazon's Prime membership hooks in consumers, and that stickiness also applies to its on-demand delivery service Prime Now.
It seems like there's a new delivery startup launching every day -- Postmates, Instacart, Deliv, GrubHub, DoorDash, Caviar, etc. But unlike its competitors, Amazon has the ability to rely on its Prime ecosystem to make sure its customers use Prime Now over and over again.
"The on-demand guys are creating an environment where you're willing to try different things," said Greg Portell, a partner in A.T. Kearney's Consumer Products & Retail and Media Practices. "The challenge for startups is creating that lock-in."
When it comes to Prime Now, consumers are already deep within the ecosystem and less likely to feel the need to shop around and try out other delivery services.
"They have you locked in, and it meets your needs easier than going outside," Portell said. "They use their technology and the ecosystem they've created to essentially automate those decisions."