How short is 'too short'?

I'm in the midst of writing a story for submission to Shotgun Honey and one of the rules is that the story mustn't be longer than 700 words - so tight, it threatens to burst at the seams!   In the usual way, I've asked some reader(/writer) friends to beta it for me and one of the responses that I got back was that the word limit was ridiculously short - how could you possibly develop a story within that limit?

Well, that's kind of the point, isn't it?   It takes skill to tell a whole story that can be read in the time it takes to eat a biscuit.   One of their recent tales - Cast Iron - is a perfect example of how to do it well.   Maybe I just can't do it...?