Many people looking to start a business are encouraged when they think they have no competition. The natural assumption is that being the only game in town is advantageous because, well, you're the only game in town. But sometimes entrepreneurs overlook the fact that they have two types of competition: direct competition and indirect competition.
For example, direct competition for a video arcade would obviously be another video arcade in town. But it's the indirect competition that may be a bigger factor in the arcade's success. An indirect competitor for a video arcade is basically any other form of entertainment on which customers may spend money. For instance, your town may not have a competing arcade, but what about a movie theater? A mini golf course? Roller rink? On the surface, these businesses may seem quite different from an arcade but they're all competing for people's "fun money".
Also, don't overlook home video game systems. Another common misperception is that people will go "out" for much of their entertainment. But movie theaters compete with DVD's, restaurants compete with grocery stores and home-cooked meals, and so on. In tough economic times, consumers will replace their "going out" options with in-home alternatives whenever they can.
Let's look at restaurants a bit more closely. Your town many not have an Italian restaurant, but that certainly doesn't mean an Italian restaurant will have no competition. Indeed, it may draw many customers who enjoy Italian food. But the point is that a lack of direct competitors is never a guarantee that a new business will succeed because there are many other indirect competitors. An Italian restaurant will still compete with Chinese restaurants and McDonald's.
If you're looking to start a business in your town just because there aren't any identical operations, don't make the mistake of thinking you have no competition. It may not always come in the form of direct competition but there are always indirect competitors that are vying for consumers' dollars, too.