5.5 inches is not "small," and "who would buy it" is all the people who bought the previous models that actually WERE small. Let me just remind you, Xperia's last Compact was more popular than its full-size phones, and has also held its value better. People are still buying it even though it's 2 years old, still really expensive, and frankly not that good.
You can't say "no one would buy" smaller phones when no one is even making smaller phones. People can't buy something that doesn't exist. Tons of us are tired of phablets and want something we can operate with one hand. A 5.5. inch display does NOT qualify.
Xperia has been slowly screwing up its Compact line for years now, and I'm officially jumping ship. The iPhone SE 2020 gets my money now, for actually making a relatively compact phone. I still wish it was smaller, but it's better than this crap, especially given how obnoxious Sony's software is and their absurd design-by-committee chasses.