Nintek Goes Down

ninAuctions follow ninLiquidation and ninAdministration; Customers ninJad out of $55,000 and rising

You know that feeling you get whenever you eat a prime cut of so-called grain fed Angus steak? The one that costs a scungy $5 at the pub? Well, Nintek have just given its customers the computer sales equivalent of food poisoning.

Cutting corners is a business' difficult lifeblood. And Nintek were at the top of their game until they went into liquidation on the 2nd of January. It's estimated that customers are now collectively $55,000 out of pocket, and the National Australia Bank – the secured creditors of Nintek – will see a return of only ten cents for every dollar of the unknown amount they had funneled into the business.

To understand this sad tale fully, we should start at the beginning -- in Perth, 2002. Nintek was originally owned and operated by a young man called Nin, until he sold the company in 2004 to two men named Brendan Tully and Matt Stone. The two already owned ZoomITG, a company that supplied medical and dental surgeries with IT infrastructure. Brendan headed up ZoomITG, the registered business and corporate arm. Matt took care of Nintek, the consumer arm which used the ZoomITG ABN to trade.

Initially, Nintek was a profitable company that was doing quite well for itself, but its forums and the launch of Nindeals made it famous. Nindeals was a bulk ordering system administered by Nintek that asked its forum members to preorder (and pre-pay for) computer gear. At its peak in the heyday of the 7900 GT, Nindeals was preordering 500 XFX 7600GTs in one hit.

The problem with the system was that it worked too well. The bulk discounts were so good that other retailers started to complain to the distributors that imported the gear about Nintek's practices. Some computer stores threatened to stop stocking entire brands or the entire product range carried by the distributor unless something was done.

And when every other computer store in the country is threatening to walk away from you, you listen.

Distributors became reluctant to deal with Nintek. Even when gear was sold to Nintek, it would occasionally sell it below cost to maintain customers. Below cost gear was bundled with other products that had a large profit margin to make up the difference and appear to be dirt cheap.

To work around Australian distributors' ill will, Nintek bypassed them and talked to manufacturers in other countries. Noctua's European headquarters and Taiwanese power supply manufacturer Hiper were all introduced to the Australian market by Nintek, which was happy to get the volumes of cheap hardware they needed. Nintek even became a retailing distributor for Crucial USA.

Meanwhile, Nintek's directors were getting greedy -- although it's hard to put an exact date on when this happened. Staff were fired for being too thorough with returns, because processing them all took too long in comparison to sending everything that came back for warranty returns directly to the manufacturers. They incurred courier charges whenever they sent working gear (that should have been properly screened beforehand) back to manufacturers.

Some customers reported that Nintek's decisions about sending gear back to be repaired were flippant. During the last three months, customers who were expecting Nintek to send their gear off for repair heard that it had been aimlessly sitting in the to-do pile. In some cases it took months for gear to be sent back to the manufacturers, and sometimes it didn't happen at all.

Nindeals' delivery became horrifically slow, so much so that members of Nintek's forums organised their own bulk purchases and handed the order over to Nintek, teeing up deals with overseas distributors so that all Nintek had to do was take the money from customers and give it to the distributors. They didn't even have to deliver anything, as the distributor in the US would deliver the products directly to the doors of Nintek's customers -- a process called drop shipping, which Nintek used extensively to cut costs and administrative work.

There are several instances of these entirely community driven bulk buys where Nintek simply never handed over customers' money to the overseas distributor. In one case, a US distributor had over 50 water cooling kits ready to be shipped on the 26th of October, but never received payment from Nintek, which had already taken money from its customers. The money for that bulk order is MIA, as is the rest of the money that should have been in Nintek's bank accounts. The administrators allegedly found them all empty when they were called in.

In the lead up to the liquidation, John Carrello and Mat Tribut of external administrators Dickson-Carrello got in touch with Nintek customers through Nintek Watch, a site that had been operating for a number of months until it was mysteriously taken down around the same time as Nintek's liquidation. They asked customers to send their invoices to Dickson-Carrello so they could build a database of clients, who are unsecured creditors. The word on the street is that they will not see a cent.

The situation is so bad that even now some customers are trying to reclaim their own faulty gear that was lying around the Nintek offices waiting to be sent off for repair. They're not dealing with Nintek anymore: the liquidators have already moved in and seized everything. The lot is now in the hands of Ross Auctions. The working hardware, the hardware awaiting replacement, the furniture, and presumably even the plastic plants from Nintek's rented Perth townhouse office.

Nintek was one of Australia's strongest online retailers, yet over a few days has shriveled up and died. Perhaps some saw it coming. In the online retailer category of the 2006 PC Authority Reliability and Service Awards, Nintek placed 5th with good customer service, good delivery and very good value for money. However in 2007 they slid to 27th place, with average customer service, poor delivery and average value for money. And all this has culminated with almost $60,000 of customer's money missing in action and a company director that can’t be found to make a comment for anyone.

As such, there is no conclusion, but we will be bringing it to you as the events unfold.