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In this video, the demonstration shows how to reduce the size of an Excel file without deleting any data. It is recommended to save a copy of the original file before proceeding. The first step involves compressing the picture size by selecting the picture, going to picture format, and choosing compress under adjust. Different compression options are available, such as setting the picture format to 220 ppi for printing. An alternative method is to adjust image size and quality settings in the Excel options menu to avoid manual compression in the future.