Quite often the only industries that small companies can compete with the larger companies in are the markets that are not big enough for large companies to try and exploit. Some of these markets are called niche’s, some of these markets are referred to condescendingly as cottage industries. While big companies will always ignore these markets, the single individual and small companies will find that they can make quite tidy profits off of these small niche’s. Walmart will always have economies of scale on it’s side, but small companies can get to know their niche obsessively and gain an unrivaled knowledge in it.
Smaller niche markets also have a tendency to obsessively create communities, drawing individuals who are obsessive about their passion, which is tremendously important. It is possible for everyone in the community to know each other and therefore be very connected. Keep in mind, not all the people in this community will make a living off of it, but they will certainly all be willing to pour a lot of money into the products created by this community. Put it this way; the owner of a small video game developer receives feedback from a fan regarding one of their games, the owner responds to the fans feedback and implements the changes. I can almost guarantee you that the fan will buy the next game, especially if their is a regular communication between the owner and the fan. If the owner is really active within the community surrounding the video games that the company makes and the communities of other small companies that make similar video games he probably has a lot of relationships similar to the one he shared with the fan who gave feedback. And these kinds of fans that the developer is contact with, they will be dedicated fans and will always pour money into games this guy develops. These fans will also be the ones who will be the most vocal about your product to the kinds of people who would be most interested about your product. Communities can exist through online fours, mailing lists, blogs with comments but they are essential for a lot of smaller businesses trying to sell products.
Tommorow: I shall continue.