Navagon: I mean retail is more expensive.
I know what you meant. I was trying to be sarcastic, but apparently that didn't shine through. What I mean is that here, new games are frequently more expensive on Steam than in retail. So you get less product for more money if you buy off Steam.
Navagon: I know Steam is a rip off in Europe and I don't know what retail is like. But given that both I and the OP are from the UK it didn't seem relevant.
Given that the UK was a part of Europe the last time I checked... I have no followup for that. I know that Steam has blessed you with your own non-Euro prices in the UK, which tend to not shaft you as badly as the rest of us. All I'm saying is that things aren't the same everywhere. But PC game retail is dying out here in Denmark as well, depending on how you define retail. Plenty of game discs are still sold, I think, but more and more of them are ordered over the internet, since the webshops have very competitive prices compared to the physical stores, like you also mentioned. Digital distribution has certainly taken a hefty chunk of market share, but I think that has more to do with ease and speed of delivery than with pricing.