With Sony's decision to kill physical games from 2028 onwards, the digital-only future console manufacturers have been salivating for is coming soon. This is obviously going to have an immediate effect in all the gaming industry. In particular, how are the big gaming retailers going to react? This move is clearly aimed against them, but it's not like they can just boycott Sony's products in the position they are (the market and the general economy are not in the best situation right now). What will they do to adapt? 

They'll focus on retro games and hardware/accessories and continue to shrink as a business. There isn't much brick-and-mortar stores can do beyond that.

They go bust.

Or they’ll keep doing what they have been doing for years and expand into higher margins products like toys, merch, TGC and other ventures. And unless they can increase their margins on hardware sales, they’re likely to reduce their push for console sales, which in the end will probably means less distribution capacity for hardware manufacturers…

Yep, at least in the UK when you went into a video game store, half the stock was stuff like funko pops lol. Well GAME went bust so there isn't really any video game retailers here anymore anyway.

CEX, Grainger Games, my local independent game store, they mostly stock only used games.

In the UK I wouldn't even know where to go to buy a new game in person. HMV or a supermarket I guess lol. Though I don't remember the last time I saw the games section in Morrisons so that might not be a thing anymore either.

Brand new physical games at high-street retailers is basically dead in the UK. People just buy online.

First, Grainger Games is still a thing? My local closed ages ago.

Second, Argos or Currys/John Lewis, but stock is limited. Argos if you are lucky to still have a physical store, Sainsburys did a number on them. Otherwise best bet is Smyths Toys.

As for discussion, many retailers, online or otherwise already provide gift cards, if Sony are allowing them to now sell digital codes, then they are obviously updating their existing API to allow for this. Shopto.net already are an official partner and do discountded credit. Currys do it every now and then too, so no reason why they also might discount games, so the API benefits them.

Sell the game at £5 cheaper than PSN and more people will buy from you, so your commission will be higher, competition opens up and hopefully also means Sony's own store starts doing it also. Especially for low demand older games.

As for how they will react. Shopto or Amazon will stay the same outside of Amazon and others no longer needing to send games. :P

CEX are screwed but I heard recently that they have looked into bcome more of a classic games thing, doubling down on retro (certainly didn't use to see NES or SNES games in stores, do now).

Grainger games probably are dead. But that's how long it's been since I've been anywhere in-person but cex for physical games lol.

CEX will probably be ok because they sell a lot more than just games. Phones, Consoles, Controllers, Laptops, Tablets, GPUs, SSDs, Board Games, I even get smart light bulbs from them lol.

It will definitely hurt but I don't know what percentage of their business consists of selling modern playstation games.

Same thing that happened with E3. Changing times. TBH I cannot remember the last time I willingly purchased from a retailer solely focused on gaming product— they tend to overcharge on everything and only stock a small catalogue of recently released games.

Band together, start a 4th console company, and sell physical media for their affordable hardware?

I specifically use them for classic games as it comes with warrantees, if I'm buying PS5 discs, I'd prefer cheap new ones from online.

Yeah, CEX as a general used electronics store, they'll be fine. Sony might be removing digital but not for another 18 months and there will be massive overlap and this doesn't eliminate the last 30 years of gaming.