The indie record shop does seem to be slowly vanishing around here as well. There are still a few places worth checking out though:
If you're in NJ both Vintage Vinyl
www.vvinyl.com and Princeton Record Exchange
www.prex.com are worthy. I'd rate PrEx a bit higher mainly of a higher quality of cheap used LPs (which is usually why I'm in a record shop) though VV seems to have an edge for new CD releases.
In NYC, Other Music
www.othermusic.com and Mondo Kim's (their website has been "temporarily down" forever but they're at 6 St Marks Pl if you want to check them out) still have the goods. You won't find any bargins on used LPs at either (or any other store in Manhattan) but they do have any new indie release you might be looking for and their CD used bins are usually filled with good stuff for $7 or so. Rockit Scientist
www.myspace.com/rockitscientistrecords, also on St Marks in a good shop as well espeically if you're looking for obscure freakbeat or a rare volume of Killed By Death or something.
If you're staying in Brooklyn the pickings are pretty slim (perhaps because the hipster population boom in BK coincided with the digital music revolution) but Sound Fix
www.myspace.com/soundfixrecords in Williamsburg is worth a look. Maybe someone from the area might be better suited to tell you about it than I.