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Kenneth Fisher warns against low VARCHAR sizes:

The first thing you’ll notice is that a single space is stored the same way in both columns. With an empty string, on the other hand, we see a difference. Char columns are fixed length. So even though we inserted an empty string into it we get back a single space.

The next major difference is that varchar columns require an extra two bytes of storage. So a varchar(1) column actually uses three bytes not just the one byte that char(1) does.

This is exactly the type of scenario row-level compression improves.