First off, Geno was a major story character in SMRPG, not a side character. A playable party member in an RPG—especially one that drives the overall plot—is a main character. Gaz is a side character, Geno is a main character. There is a difference.
Second off, would you like me to list all the characters that appeared in only one game before joining Smash? (Smash appearances don't count, such as former Assist Trophies, Spirits/Trophies, or Stage Elements)
Sheik (also isn't the main character and therefore is a "side character" by your standards)
Greninja (Counting X and Y as the same game)
Ness (Earthbound sold less than SMRPG btw)
Lucas (Mother 3 also sold less than SMRPG)
Ice Climbers (Sold less then SMRPG)
Roy (His game wasn't even out yet, and when it did release it was still Japan Only. Leave it to Fire Emblem to have the original "shill pick" Also sold less than SMRPG)
Robin (Fire Emblem Awakening still sold less than SMRPG)
Lucina (Still got in, regardless of each-hood.)
Dark Pit (One game appearance, a side character, still got in to Smash. Regardless of echo-hood... oh and his game sold less than SMRPG)
R.O.B. (Only in-game appearance was Mario Kart DS, otherwise merely a peripheral that no one asked for to be put in a game, and even less knew of. The vast majority of casuals mistook him for Wall-E. By the way, multi-roster games like Kart racers and Fighting games usually only have a small amount of main characters, the rest are side characters, which R.O.B. is counted as)
Shulk (Took a huge portion of the North American Nintendo fanbase to even get his game overseas, which worked... but still sold less then SMRPG)
Corrin (His game wasn't even overseas yet... still sold less than SMRPG even after it made it across)
And soon to be an ARMS character. (ARMS also sold less than SMRPG. If the character isn't Spring Man—the main character—then it will be a "side character." A side character from a "niche" game, according to the sales figures.)
Most of these characters were in games that sold less than SMRPG, just in case it wasn't made clear. A few of them are even side characters. If a game like SMRPG is niche, then the games it outsold are technically niche and even more obscure. Which is obviously not the case in reality, therefore SMRPG technically isn't niche especially if games it outsold, such as Fire Emblem Awakening, are considered colossal, worldwide successes.
Oh and by the way, Geno did cameo in Mario & Luigi Superstar Saga. So, technically, he has more than one game under his belt.
Also, although having been in more than one game, Piranha Plant became a playable character. This isn't even side character level; this is generic enemy #3 level. Like, almost as low as R.O.B.
If all of these characters can get in, so can Geno.
This is a bit reductive. I'll go through all the characters because why not.
Sheik - Sheik is Zelda. Zelda is important. That's why shes in.
Greninja - Greninja is a Pokemon which sells at least 10 million every game. There's tons of merchandise and an amine. Geno isn't even in the same league.
Ness - This might be one of the only fair comparisons to Geno. Yes, it sold less, but Ness was the main character of the game. Geno is one of five party members and Mario was the star. Smash has shown they prioritize the top. You might have more of a point if Poo or Jeff were playable.
Lucas - Same as above though this was a sequel to a game that was already in Smash
Ice Climbers - This character was specifically picked to be a Classic NES rep. Nonetheless, they still re-release Ice Climbers all the time.
Roy - This character was a clone of Marth which is why he got in and why he was later removed (till Smash 4 DLC due to demand).
Robin - Maybe a decent comparison but Robin was still the player character of the game. Weak comparison still because Awakening released in 2013 and Smash Wii U released in 2014. He was still relevant when Smash 4 came out.
Lucina - Besides she was going to be a skin.
Dark Pit - See above. He's in because he was meant to be a skin.
R.O.B. - Not sure why you're bringing this one up because ROB was a well selling toy that had been referenced in a lot of Nintendo games. He was also in Mario Kart DS which sold more than Mario RPG (since it keeps being brought up)
Shulk - Again, main character of his series which Geno isn't.
Corrin - Main character. Also, it actually sold more than Super Mario RPG.
And soon to be an ARMS character - No, sold more
I noticed you brought up sales a lot and I'm not sure you understand what your saying. Smash has never used sales by itself. The reason I bought up sales was I was comparing Super Mario RPG to the entire Mario series. Comparing it to other game series has never worked. Also, I would expect a Mario game to sell better than most titles for obvious reason. Trying to compare Earthbound to a Mario game is silly.
What you are forgetting is that Smash will often go for the star of the series with a few rare cases. Usually these exceptions are for other reasons, like Lucina and Dark Pit being made characters when they were planned to be skins. Maybe you can say Robin but the entire game takes place from his perspective so that's not a stretch. The only outlier is ARMS but if they choose a character like Ribbon Girl or Min Min they aren't really straying to far off the beaten path. Moreover, they often aren't DLC are are usually a lot more current than Super Mario RPG is now. Again, it's a lot of comparisons that don't make much sense.