The shop is facing closure because gay rights campaigns have worked too well and made people forget the importance of spending money with gay companies, manager Kim Brinster said.
They can now get the books from websites like Amazon while mainstream chains have improved their selections since the Oscar Wilde Bookshop opened in 1967, Ms Brinster said.
When she arrived in the city in 1980, it was "drummed into" the gay community that it was important to "spend gay dollars in gay businesses", she said.
"People are less aware of that 'buy gay' concept now," she said.
"Young members of the community tend to take things for granted.
"They forget the origins that now allow us to walk down the streets of many neighbourhoods in New York, hold hands and not necessarily get the crap beaten out of us."
The Oscar Wilde Bookshop has long operated at a loss and saw a further 30% drop in business after 11 September because it is a fixture in gay and lesbian tourist guides.
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During its early days, it endured bomb threats, smashed windows and swastika graffiti with the words "kill fags" written on the walls.
There was little gay and lesbian fiction and non-fiction being published when the shop appeared, and many people credit such stores with opening up the market.
Deacon Maccubbin, founder of the Lambda Rising chain of gay and lesbian bookstores, said current writers were not helping by putting links to Amazon on their websites instead of urging readers to go to specialist shops.
"I wonder if they really think they would have been published at all if not for the gay bookstores that sprang up around the country in the 1980s and 1990s?" he said.
"In the 1970s, that literature barely existed."