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Wal-Mart Is Making Friends With Facebook

But will social media get the big-box retailer out of the doldrums?


Wal-Mart WMTThe Internet has been a weight hanging on the necks of brick-and-mortar retailers. Online retail already has knocked off Circuit City and Borders. Even top operators like Best Buy (NYSE:BBY) and Wal-Mart (NYSE:WMT) look shaky.

The omnipresent threat is Amazon (NASDAQ:AMZN), which continues to relentlessly push forward. Its Kindle Fire tablet computer is selling at a rapid clip and should provide Amazon a strong platform to capture even more marketshare.

Can the traditional players fight back? Well, they’re trying. Wal-Mart, which already is getting web traction from its video streaming service, Vudu — which hopes to elbow in on Netflix‘s (NASDAQ:NFLX) world — now is hoping to make an online splash through social media.

This week, the company launched a partnership with Facebook in which Wal-Mart will emphasize the “local” — namely, more than 3,500 stores will have their own individual Facebook pages.

Now, this will be more than just a bulletin board for deals. Rather, Wal-Mart will leverage its 9 million Facebook fans to learn from their interests. The result should be more personalized offers, which are based on a user’s social graph.

Sounds kind of out-of-character for the dowdy Wal-Mart, right? Perhaps. But the company does have a long history of relying on sophisticated technologies, such as with its extensive logistics platform. And with the added data from social networking, Wal-Mart should be able to wield even more precision with its inventory and merchandising. After all, Americans spend lots of time on Facebook, and they definitely are willing to share their opinions.

Still, the Facebook initiative is not a cure-all for Wal-Mart. If anything, social media still is in its relative infancy, and it’s hard to differentiate actual commercial potential from hype. How sustainable is the “like” button when it comes to branding and targeting?

In the meanwhile, Wal-Mart still needs to worry about other brick-and-mortar rivals, including warehouse giant Costco (NASDAQ:COST) and deep discounters Dollar General (NYSE:DG) and Dollar Tree (NASDAQ:DLTR).

That said, it’s probably not a good idea to jump into WMT just because Wal-Mart jumped into cahoots with Mark Zuckerburg. The company has posted declines in same-store sales for the past nine quarters, and while Wal-Mart has plenty of motivation to get serious about its digital efforts, there’s no way of knowing whether this approach will grow Wal-Mart’s business again.

Tom Taulli is the author of “All About Short Selling” and “All About Commodities.” You can also find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.

Article printed from InvestorPlace Media,

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