Pros and cons to each, but as a relatively inexpensive and very convenient means of consuming games, it's a difficult task to untether physical retail media from consoles as sales platforms.
Steps being made in that direction include tethering online services to hardware platforms, tethering individual user accounts to software purchased, regularly updated games (subscription passes) among others.
Many of the games currently being distributed wouldn't have a market in traditional retail space due to MSRP/production distribution inventory cost ratios.
Eventually, the primary consumers of retail media games will be collectors and traders (used game consumers) and the minority of unconnected players.
But as it stands, the proposition is often one of download a new game for $60 (convenience factor) vs. $60 for a physical copy. Most consumers are still very much attached to the idea that they are buying a copy of a game (that can be traded, loaned or sold) rather than a perpetual license to play a game.
Functionally, digital is superior. Physical copies have in effect become what PC games have decades ago: installation discs and security check measures. Retail games can be lost or damaged, must be stored and shuffled in and out of a console. This isn't an issue for digital licenses.
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