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In this video tutorial, the process of reducing Excel file size without deleting data is demonstrated. It is recommended to save a copy of the Excel file before attempting to do so. The initial file size is shown as 1232 kb, after saving a copy. The first step involves compressing picture size in Excel by selecting the picture, going to picture format, selecting compress under adjust, and choosing the desired compression options. An alternative method is discussed where picture compression settings can be permanently adjusted in file options under advanced settings. This ensures that images are always compressed without manual adjustment.