The second hand physical market is also holding prices down. A new game at $70 is competing against an entire library of used games permanently on sale at $20-$40. Also the need to clear physical inventory means that new game will go on sale eventually at retail even if the digital price is still $70. So the new game is also competing against its future discounted or secondhand price if the consumer feels like waiting.
Also, certain brands, like Nintendo and Square, are famous for almost never putting their back catalog on sale, so the only way to get a discount is through the secondary market. Sure in the long term physical media becomes rare and pricey, but in the medium term, while the game is still contemporary, physical is usually the cheapest option for mass market titles. For indie games, you can usually just wait for a steam sale or humble bundle.