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In this video, the tutorial demonstrates how to reduce the size of an Excel file without deleting data. The first step is to compress picture size by selecting the picture, going to picture format, and selecting compress under adjust. Different options are available to reduce picture format, such as setting PPI for print quality. An alternative method is to go to file, click on options, then advanced, and scroll down to image size and quality. Ensure that discard editing data is selected and do not compress image file. This allows for reducing PPI to make the image smaller without worrying about compression in the future.