I have never bought a music CD. I'm almost 20 years old.
I don't even have a good audio system, so why would I care about sound quality? 320 kbps MP3 is good enough for me.
The problem is that an online store selling FLAC audio files, would require huge server resources.
Most people don't even know what audio compression is, so they'll be content to listen to shit compressed stuff with their shitty apple headphones.
Spending lots of money for the 1% who cares, is not worth it for those online stores.
That's why physical mediums are still selling.
They will go extinct eventually, because with time internet connections get faster (hopefully), but CD quality audio files keep their size, so they'll start offer better quality stuff, or everyone will have enough storage space and cheaper internet connections, so that they can download lots of FLAC files from the internet, while buying the original in iTunes, this way it's legal and you don't use online music stores' resources to obtain higher quality.