GoKawiilRemoving physical copies from circulation eliminates secondhand markets. When you're done, you can sell your copy, lend it to a friend, or trade it in for store credit. Without physical releases, the entire business model of rental services like GameFly falls apart, as does renting from a library. Aside from gamesharing, we lose all these possibilities when digital is the only option. What's more, publishers and the companies that control online storefronts have full control of pricing. Physical offers far more flexibility since any retailer can sell them; you'll regularly see boxed games on sale for lower than digital prices (especially once they've been out for a while).
On Switch and Switch 2, digital downloads take up more storage space, since cartridges (excluding game-key cards) have the full game on them. This isn't relevant on PlayStation and Xbox; loading files from discs would be way too slow, so the discs instead act as a key to confirm you own the game. However, PS and Xbox discs are more convenient for people with slow internet speeds. Inserting a disc copies the data to your system's storage, and while most games have day-one updates with bug fixes, downloading those doesn't take as long as the full game.
Another often-overlooked concern is how console refund policies are terrible. PlayStation only grants refunds if you didn't start the download, while Nintendo declares all payments are final. Xbox's refund policy is more generous, though vague. You may be able to get a refund if you ask within two weeks of purchase, as long as you "haven't accumulated a significant amount of play time." Compare that to Steam's refund policy of granting refunds for any reason as long as you request within two weeks and have less than two hours of playtime. You can still request a refund if your case is outside these parameters.