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In this video, the tutorial demonstrates how to reduce the size of an Excel file without deleting any data. The first step is to compress picture sizes by selecting the picture, going to picture format, and choosing compress under adjust. Different options are available for compression, such as 220 ppi for printing. An alternative method discussed is setting a default compression for all images by going to file, then options, and advanced settings. Make sure to select discard editing data and don't compress image file to reduce file size permanently.