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In this video tutorial, the process of reducing Excel file size without deleting data is demonstrated. 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 for compressing the picture format based on the desired outcome. Another method suggested is to go to file, click on more, options, and then advanced where image size and quality settings can be adjusted to ensure pictures are always compressed. This method helps in reducing the file size consistently without the need to manually compress pictures each time.