Small Business

How teen created a profitable sneaker pawn shop

Teen sneaker phenom
Teen sneaker phenom

Like many 16-year-olds, Chase Reed spends his days tied to his iPhone and Instagram account. 

But you won't catch his dad, Troy Reed, bugging him to get off social media anytime soon. That's because with each "like" the teenager acquires online, the father and son are seeing big dollars.

The father and son have opened a pawnshop exclusively devoted to sneakers. Sneaker Pawn USA is based in an apartment in New York's Harlem where the two used to live and have converted into sneaker start-up central. The duo advertise on social media platforms and share their inventory. Sneakers fans from around the world visit their Harlem shop, and shoes can be purchased online.

Chase works along side his father to buy, trade and sell Air Jordans and other brands in the store, which opened in June.

Troy says his son—still in high school—runs the show. "I actually work for him, and it's probably the best job I've ever had," said Troy, himself a serial entrepreneur. His past ventures included barber shop. He now works full-time at the sneaker pawn shop.

Turning a $30,000 inventory into a start-up

Troy Reed and his son, Chase Reed, are Harlem-based entrepreneurs who buy, sell and trade Air Jordans and other brands at their Sneaker Pawn USA store.
Source: Kate Rogers

The pair got the idea for the business when Chase was 14. Troy, who is divorced, admits he indulged his son and allowed him to amass a basketball sneaker collection worth about $30,000. Troy then persuaded his son to sell the shoes to generate the cash for a physical store.

"It was hard to let go of the collection because I was 14 years old with 200 pairs of sneakers, and all of the sudden you have to go back to zero," Chase said. "But it was just part of becoming a young man and an entrepreneur."

In 2013, they sold Chase's shoes right out of the trunk of Troy's car on 125th Street. But as word spread, they quickly realized they were onto a big trend. Mom-and-pop pawn shops are ubiquitous, but few if any are devoted to sneakers.

The duo now have hundreds of pairs of sneakers in the store.

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The basketball sneaker market is booming. Market research firm Janney Capital Markets reports basketball footwear sales hit $4.2 billion in 2014 in the U.S., citing data from SportScan, a consumer insights firm. Janney forecasts sales will increase 12 percent to $4.7 billion in 2015. 

Once considered a fringe urban shoe trend, collecting basketball shoes reached a broader audience when Nike released its Air Jordan I in 1984. The shoe was launched by Michael Jordan.

Chicago Bulls’ Michael Jordan sports his Nike Air Jordan sneakers during a game against the Washington Bullets in Landover, Maryland, in 1985.
Focus on Sport | Getty Images

Troy said the markup on previously owned sneakers can be anywhere from 100 percent to 800 percent given consumer demand. For example, Nike's LeBron James "Crown Jewel" sneaker originally retailed for $250. But they're selling the pair for more than $1,200 at Sneaker Pawn USA because of its limited edition status.

"This is the new stock market—these sneakers are commodities," Troy said. 

Troy and Chase won't disclose how much cash they're bringing in per month, but say they hope to attract a private investor in the next year to help them keep up with demand and expand into locations across the country. In just six months of being open, they say they're profitable.

I'm a businessman now'

2015 the year to start a small business?
2015 the year to start a small business?

This year Chase is teaming up with a shoe manufacturing company, Relevant Customs in Mount Vernon, New York, and plans to release a high-end line of shoes. Styles will feature exotic leathers with price tags of $10,000 and higher.

As for Chase's own private sneaker collection, it stands at around 50 pairs today. He has learned the art of looking cool, letting go and making money—all before his 18th birthday.

"If I get a nice shoe in the store, I'll end up selling it rather than collecting it," Chase said. "I'm a businessman now."

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—CNBC's Betsy Cline contributed to this report.