Online retailers are becoming increasingly aware of the power of user-generated content (UGC) to boost sales and strengthen customer relationships, according to research by e-commerce specialists E-consultancy.

Experts argue that firms must overcome any nervousness about handing power to the consumer and take advantage of social networking tools and user-generated ratings and reviews.

The Social Commerce Report 2007, which was commissioned by hosted applications provider Bazaarvoice, found that 51 percent of online retailers said they considered UGC to be extremely or very important to their firm's future strategy. Customer ratings and reviews are being used by just over a quarter of respondents, but more than half said they plan to include this type of content in their sites in the future.

The report, based on the findings of a survey of more than 800 online marketers, including 360 internet merchants, found that the biggest benefit of publishing user ratings and reviews is improved conversion rates. Improved customer retention and loyalty, and better search engine optimisation were also identified as key benefits.

Retailers are realising the benefits of social commerce, said E-consultancy's head of research, Linus Gregoriadis. The advantages of user-generated ratings and reviews are not just increased conversion rates - it's about building stickier sites by producing more engaging pages.

Sam Decker, marketing officer of Bazaarvoice, said barriers to firms using UGC include insufficient IT resources and a lack of in-house expertise in content moderation. Solutions that make it easy to go live with little IT involvement are important [for firms to consider] here, he added.

Decker pointed out that there a range of tools available to firms to help them measure the effectiveness of UGC and social networking. Ultimately, it's about finding things that have an impact on sales and not just launching cool widgets on your site - but the ROI is measurable on multiple fronts, he said.

E-consultancy's Gregoriadis added that the major factor preventing firms from investing in UGC projects is the fear of bad reviews, although the reality is that the majority of reviews that are generated tend to be positive. These days you can't control what people do and say about your brand, he argued. There will be UGC about you irrespective of whether itís on your web site, so you might as well use it to create a stickier site.

But despite the interest in UGC evidenced by the survey, many firms remain reluctant to explore the associated business benefits.

"It is something that we are pushing with clients rather than them coming and asking," said Ben King of internet applications specialist bit10. "For example, we have started telling people that serious applications for the Facebook platform are going to be the next big thing. Banks, for instance, could release a component for Facebook that integrates your current credit/debit card balance. "