Yes, it looks profitable but the market is relatively very small compared to the larger formats.
So, it is like: large profit x very small market = still very small profit.
Yep. There's also the rather unavoidable correlation between shrinking size and increased need for customization and/or strict adherence to compatibility - i.e. you can fit pretty much any parts you want into a standard ATX mid-tower, but when you're shooting for as little wasted space as possible you are suddenly looking at a very complex table of which GPUs/CPU coolers/PSUs/etc. that fit into which cases. Meaning that there's
more need for choice (to accommodate all the various hardware combinations people have/want/need) in SFF than in non-SFF, further shrinking profits as sales numbers per product shrink. Not to mention the abundance of different form factors (console-style, old-school PSU stacked above CPU cooler with either SFX or ATX, Ncase-like long "standard" layout+SFX, long sandwich+SFX, sandwich+Flex/1U, various externally powered layouts, etc., etc.) and how much aesthetic preferences play into component choices (as SFF cases tend to sit on your desk people tend to be picky in what they like). In the end you are left with a "large" market (that is still tiny when compared to the DIY/BYO PC market) divided into hundreds of smaller ones. It would be extremely interesting to see sales numbers for the various successful (read: has reached production) cases that have been developed by/in this community - I would assume the most successful ones have sales in the low thousands, with the vast majority maybe not even breaking a hundred orders. Then compare that to major manufacturers with worldwide distribution networks, streamlined product development and name-brand recognition, all while operating in the larger non-SFF market - it's not even a fair fight. Development costs of SFF cases are likely comparable if not higher than non-SFF cases, driving up prices, with the only "advantage" being a lot of enthusiasts being willing to work for free in developing this stuff.
Now, to be fair, there are some brands making an attempt - like Fractal or Silverstone with their console-style cases, or In-Win with the A1. But most of these have to make concessions in one way or another to make them easier to plan a build in - with the most common being bundling a PSU to avoid people buying oversized PSUs that don't fit, which immediately excludes anyone advanced who would want a different PSU for some reason - and generally can't offer the level of customization of more flexible small-scale manufacturers.
The back side of this is of course that these small-scale manufacturers are - at best - struggling to maintain profitability at all, and I would imagine the vast majority of them do this stuff as a side project rather than a main job. People need to eat, after all. Which leads us back into limited and variable product availability cycles (how many cases can you afford to order for a given production run to ensure availability beyond pre-orders, but also how long can you afford to have unsold inventory sitting around before you start racking up interest on any debt you got into financing the production run?) and the like. There are no economics of scale to alleviate these problems, meaning there is no way to smooth out the fluctuations. And no manpower/organization to step in when unforeseen things happen - if a case is designed and sold by a single person and they get sick or have some other major life event happen to them, there's nobody else who can step in and keep the ball rolling, unlike a company with hundreds of employees.
In short, I don't think stuff like this is avoidable at all for specialty hardware like SFF components, sadly. Comes with the territory.