I buy some games from download services (Steam, Direct2Drive) but I still really prefer retail. Unfortunately, the only places I can go to browse and buy retail PC games are Wal-Mart and Best Buy, two stores I hate. Gamestop, the only other game retailer in town, carries only a handful of PC games, stored on a beat up old rack in the back of the store. Most of the games are older game that didn't sell well to start with. None of the games they carry are on the just released list. In order to get PC games retail, I have to order them from an online source, usually Amazon.
I don't see downloading replacing retail due to preferences, I see it replacing retail due to lack of retail availability. And Khell_Sennet has a point about the lack of accountability at these download services (EA is particularly bad from a customer service standpoint). Who do you complain to if things go wrong? In a retail store, the person is right there across the counter. He can't ignore you, you're standing in front of him, shouting. At an online service, all they have to do is hit the "send form email reply" and they are done. No reason to pay attention to you, you aren't bothering the other customers. And you can't just reach over and slap the ever loving hell out of them if they mouth off to you either, it's an email. They know they can't be touched (hell, the EULA probably says that they aren't responsible for anything, no matter what) and it shows in their arrogance.
Gaming has got to be about the only industry in the world where companies can fail to perform and not be held responsible.