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In the tutorial, the creator demonstrates how to reduce the Excel file size without deleting any data. They recommend saving a copy of the file before attempting to reduce its size. The first step is to compress picture size in Excel by selecting the picture, going to picture format, and then compressing under adjust. Different options for compression are available, such as reducing the picture format to 220 PPI for printing. An alternative method is also provided, where users can go to file, click on more, then options, and finally advanced to adjust image size and quality settings by selecting discard editing data and not compressing image files. This method ensures that pictures are always compressed without the need for manual intervention.