Game-key cards are different from regular game cards, because they don’t contain the full game data. Instead, the game-key card is your “key” to downloading the full game to your system via the internet.
Pay a premium for a physical copy of your game, and the cartridge may not contain the actual game. Only on Nintendo Switch 2.
That was less a Nintendo thing than a retailer thing. Retailers didn’t take kindly to being undercut, first parties got to keep more of the revenue, so there was literally no incentive anywhere to make digital cheaper.
But let’s be clear, everybody involved except for the retailer made a lot less for a physical copy in that scenario. The real thing that changed here is Nintendo isn’t afraid of not having shelf space anymore.
And while key-in-cart means retailers still keep a cut, storage costs on Switch cartridges are HUGE, so there’s still an incentive to get users to subsidize storage.
Physical games weren’t cheaper at MSRP, but retailers were known to put them on sale or lower their price permanently more frequently than Nintendo’s eShop.