When I was a retail cashier between 2000 and 2007, the store I worked at offered both paper and plastic, but we were told not to ask and to just bag plastic and if a customer wanted paper, they would have to specifically ask for it. We were told it was because plastic bags cost a fraction of a penny, while paper bags were about 7 cents, and they didn't want to waste money on paper bags for customers that honestly didn't really care.
For a long time, the default in many grocery stores in NYC (where the typical method of getting your groceries home is on foot, a bag in each hand) was a paper bag (for strength and structure) inside a plastic bag (for handles).
We use paper bags at our retail outlet, they're more expensive and suffer catastrophic failure vs cheaper plastic which is, well, plastic (stretches first usually).
You have to take more care with paper (people are lazy) and it costs more from sustainable sources (people are miserly).
Remember that back in our day the paper bags didn't have handles. Even today, paper bag handles suck (I'm looking at you, Whole Foods).
The reason consumers embraced plastic bags was the handles. Then manufacturers figured out how to make them super cheap.
Now there's an entire generation of people who have never heard the phrase, "Paper or plastic?"
Or "Smoking or non-smoking?" in a restaurant or airplane for that matter.