Video games retail would be one of the last places you'd consider opening a business if you had a lump sum to work with and there are plenty of reasons why It's not going to stick around longterm.
1) business is in decline. A shrinking percentage of customers want physical media.
2) lower margins - distributors have been demanding higher and higher wholesale prices to physical stores as time has gone by. It's harder to make a profit when your costs go up.
3) constantly devaluing stock - with years of precedent, gamers expect games to devalue and to be cheaper months after launch. Don't get stuck with a bunch of games that haven't sold or you might make a loss when being undercut by digital stores, online retailers and (if you can find one) other physical stores.
4) parts of the industry have already disappeared - pc games don't get physical releases, now we're starting to see big name games on console do the same. A safe bet would not be that the next consoles will even be equipped to play physical media.
Annecdotal:
5) extremely price sensitive customer base - gamers are quick to price compare, were one of the early communities to have really embraced online price comparison and have a culture of sharing and exploiting deals and glitches that I'm not certain is the same as with other enthusiast consumers.
6) price is all that's important, it's difficult to provide extra value that differentiates your business when gamers, certainly the most passionate ones - unfortunately, potentially the ones most likely to want physical media - know what they want and don't want or need sales advisor help.
7) efforts to diversify product lineup has alienated customers. Here in the UK, I see the same complaints about our physical chain retailer, Game, selling collectables and assorted products that are not video games.
Those are just off the top of my head. Tbh, I find it quite interesting to see how even people who advocate for physical product put that preference to one side and cannot forgive various efforts to keep physical retailers in business. It feels a lot like the audience want a store from a different time, which coincidentally is also where the product they want comes from too.
In answer to the thread's titular question, physical media would need a miracle to survive and won't get one, imo. If the market shrinks gradually, the remaining retailers will gradually pull out as the business shrinks and declines. In that sense, a particular chain could be last man standing.
But I think we could see a sudden change in the market. If physical retailers can hold on until the next Gen of consoles they may find the new systems don't have a physical media capability and that'll be curtains. If Nintendo's next system doesn't support physical media, then I think it's unlikely that retailers will survive until the next PS/Xbox hardware anyway as that would represent a sudden, significant decrease in the market they can service. But even if Nintendo, Microsoft and Sony do continue with physical releases, I would think it unlikely that dedicated physical retail will survive 5 years.
