The Washington Post just published a piece saying Barnes & Noble has reversed their fortunes, to the point where they are going to open 30 new stores this year, the first expansion in over a decade. However, I have usually only shopped there during a sale, like when they have 50% off all hardcovers after the holidays.
I used to think like you did, that digital was the way to go. I bought a Kindle and a Nook, and I must have hundreds of books on them now. But eventually, I missed books. There's just a visceral pleasure I get from holding one while I read.
You may also not agree with this, but I feel no tablet or digital device does justice to picture books. How-to books are also easier to leaf through than the digital versions.
Bottom line, I see benefits to both, so I buy both. I shop at a couple of indie bookstores nearby. Sure, I pay more, but the staff knows their stuff and has consistently led me to things I wouldn't have found through Amazon.
I don't think physical books will ever go away. If anything, they may eventually stage a comeback, much like vinyl albums have done.