I'm published as an e-book author - but I wish I had physical books on shelves.
I've been reading some of my old favorites (Dan Simmons, David Brin) on my iTouch - but I first read them in paperback, and it's unlikely I'd buy a book cold just for my eReader.
I don't think anyone wants *just* physical books or *just* e-books. We want to stock our Nooks and Kindles with light reading when we go on vacation, instead of lugging around a knapsack full of thrillers; and when there's a book or series that we really love or are looking forward to, we want it sitting on our shelves. And if we want the physical book, we'd like to find it in a bookstore, if we can, instead of on-line.
Bookstores do best in communities where the residents are as interested (or more interested) in cultural and educational activities as they are in sports, movies, nightclubs and bars. In the US, that often means urban centers. People move to cities for the cultural opportunities as well as for work. So bookstores are a good business fit for cities. But they're also retail businesses that require a LOT of floor space, selling a product that is often low-margin and low-volume. That's a terrible fit for cities where real estate prices are skyrocketing and floor space is measured in the square inch instead of the square foot.
It may not be digital's fault that bookstores are fading away; it may be the realtors'.