Staples has announced a major overhaul of its operations. The company is closing or downsizing dozens of stores in Europe and the U.S and says it will invest more in its digital business.

Less than half of the company’s revenue comes from its online unit right now. But younger customers are increasingly buying commodities like office supplies by computer, tablet or phone. Joe Feldman, who follows Staples for Telsey Advisory Group, says Staples has to deal with increasing competition from players like Walmart and Amazon.com.

“Staples is trying its best to defend its turf,” Feldman says. “But clearly there has been some incursion from other players.”

Staples’ main customers are small businesses. The company makes much of its revenue on delivering office supplies, like chairs, printer cartridges, and paper, to businesses with under 500 employees.

Morningstar analyst Liang Feng expects Amazon to increase its presence in that business, especially with the debut this year of AmazonSupply.com. AmazonSupply.com is aimed primarily at industrial customers right now but that could change.

“If I would say 10 years from now do I see Amazon as a major player in this space? I would have to say yes,” says Feng.

One analyst says the days of hawking goods like pens and paper in “humongous square footage” are gone. Staples has other problems besides online competitors.  A slow economy creates fewer small businesses and the office supplies business has been in a slump since the recession started.