Caliper piston retraction is normal and desired. The piston seal distorts when the piston moves forward then draws the piston back slightly when hydraulic pressure is removed. This keeps the brake from dragging.

A few things.

Are the brake pads flat? They will sometimes wear on a taper causing a soft pedal.

Are the bleeder screws at the highest point of the caliper? It is usually possible to swap calipers left to right but the bleeder will end up on the bottom.

Make sure the caliper can slide back and forth on the mountings. If the sliders are stuck the caliper mounting and rotor will flex causing a soft pedal. ( This only applies to single piston floaters not dual piston fixed calipers. )