Have a read through this thread for more info including an update on the bug and workarounds.
Yes. It was a bug. It's referenced in the other thread I linked to.
It's been fixed for xfce4-panel 4.13.2, but it was not back-ported to xfce4-panel 4.12 (which is what you are using).
Open a bug report and ask developer to port the fix back to the 4.12 branch as well (already done - see: https://bugzilla.xfce.org/show_bug.cgi?id=14507).
root@host:/home/user# xfconf-query -c xfce4-panel -p /plugins/plugin-clock-4/digital-format -s "%06:16 PM"
Failed to init libxfconf: Did not receive a reply. Possible causes include: the remote application did not send a reply, the message bus security policy blocked the reply, the reply timeout expired, or the network connection was broken..
Don't run xfconf-query as root. It needs to be run as a regular user so it can connect to the xfconfd daemon instance running under your user profile.
You only need to use the plugin number not the name (plugin-4 instead of plugin-clock-4).
xfconf-query -c xfce4-panel -p /plugins/plugin-4/digital-format -s "%l:%M %p"