Hard copy PC games shops are indeed in decline, if not already almost extinct. However all of the custom has gone online, in fact I haven't brought a PC game from a shop since last year, primarily because a) I haven't been to my nearest games shop [which is about 20 miles away] in a while, and b) because the games shops are now composed primarily of console games. However I have brought several games online, including through Steam.
Now, how you view Steam and buying and downloading games is varied. I must admit, I do prefer to have a hard copy, but that usually costs more money these days, which is a bit daft but I guess it's all about shipping charges and so forth. However...and this is going to bite me on the arse now that I've said it, I have yet to have any problem with Steam, Gamersgate or Good Old Games. Obviously there will be people who do have problems with them, but they should still be able to get their hard-copy games from places like Amazon and perhaps even ebay if they are willing to take the gamble on the quality of the product when it arrives.
So, the PC gaming is doing just fine. Even the niche industry is doing nicely with the Flightsim section seeing things like Rise of Flight, MS Flight, DCS and so forth being released. Then there's Indie producers like Mojang with Minecraft, and you still have the big hitters with Mass Effect 3, Deus Ex: HR (Human Resources?) and the inevitable Sims series which continues to be a top seller. If anything the PC gaming industry is doing better now than it ever has, because of the internet developers no longer need to look around so hard and pay stupid prices to Publishing companies, when they can just release it on the internet. Sure it will get a bit further with a big name behind it...but it will still be out there for people to play, whereas before the internet it would just go as far as a few friends who you can copy the disk to, or perhaps a bit further if a PC gaming magazine picked up on it.
TLDR? Rumours of the death of PC gaming have been greatly exaggerated