GameStop is still the largest console retailer and they recently reached an revenue sharing deal with Microsoft on the Xbox Series X where GameStop gets a cut of digital purchases on any Xbox Series X that was purchased from a GameStop.

Why would Microsoft agree to such a deal? Is it really so hard to take Xbox orders online and ship directly to the customer?

I suppose gamestop would then take the position of trying to sell Xbox consoles instead of PlayStation. They can even offer discounts based on their future expected earnings from the digital purchases on the console.

Gamestop has a significant retail presence, Microsoft has none. It's quite tempting to just go to the local shopping center, pick up a system and a handful of games (with a decent return policy that's more reasonable than the one at big box stores) rather than ordering it online and waiting for it to arrive.

The overlap between people using cash on a daily basis and people who play games is pretty big. Think of all the people getting tipped in cash, or with horrible credit, or just kids. Gamestop is where they go to get a digital code for cash.

These are pretty prevalent in Walmart, CVS, et al.

They don't operate a storefront (in the digital sense). Retail copies of games contain codes for one of the above store in lieu of physical media. You're buying a code from GameStop, with the code delivered digitally -- and sometimes this is cheaper than buying it directly.