Maybe it's different in the UK, but games don't always cost more digitally than they do physical at launch. Sometimes they're the same, and the only way physical is cheaper is if you plan to sell it back later on. But the up front purchase costs is the same.
Also:
1) people may have points cards/rewards bonuses for digital games
2) people don't necessarily buy every game day 1 anyway, so they can wait for a digital sale which are increasingly more common
3) even for people that buy games day 1, they don't necessarily need to buy every single game that comes out. So one $60 digital purchase is perfectly within their budget since they don't feel the need to own every single AAA game that comes out.
4) people may prefer the convenience of buying something and downloading it immediately and not needing to constantly change discs to play different games (edit: as mentioned above, some do for license sharing as well), and don't mind if they end up paying a bit more for it.
Why do people go out to restaurants instead of cooking every single day? It's almost as if people have different priorities with their money, and can often afford it just fine and just do whatever fits their needs. These seem like fairly obvious points!
