Not sure how quickly game shops will disappear, if ever. All I know is that if they do, then it is basically the end of the game industry. Expect another crash like the one in '83 if they manage to eliminate the physical shops. The current model very much relies on having enough physical media so that shops will sell hardware too.
The crash of 83 was largely brought about by the overabundance of low quality games and hardware rapidly eroding consumer confidence. If the consumer increasingly chooses digital over physical, then you won't see the critical reason for the failure 35 years ago. In fact, the industry today seems almost immune to the primary causes of the 1983 crash since storefronts - especially Steam, but also the consoles - are littered with low quality crap. The gold can still shine through, however. Though, perhaps you could consider the Fallout 76 disaster to be a rough equivalent to the Atari 2600 Pac Man port fiasco. The consumer loses confidence when even trusted and popular names release horribly awful products.
And, much as I despise it, an all-digital era is coming. PC gaming is practically all digital already, and with Microsoft about to offer a disc-less option, I think there is a real chance they choose to go all digital for the XBox gen 4. It'll be only a matter of time until Sony (PS6?) and Nintendo (Switch successor) follow. The latter two perhaps only staying physical longer because of their strong positions in Japan.
There's just too much pure profit for the devs and the console makers in the digital landscape for them not to be pushing hard for it. Especially since first sale doctrine goes out the window.