When Whole Foods (WFM) first opened in 1980, organic food was as exotic as moon rocks. Now, its as common as dirt, and larger rivals such as Kroger (KR), the largest traditional food retailer, have been gnawing away at the specialty grocers profits in recent years.

According to a recent client report from Barclays analyst Karen Short, customer traffic at the Austin, Texas-based chain has slumped by what she described as a staggering 3 percent since fiscal 2015, equaling about 14 million customers. Convincing those shoppers to give Whole Foods another chance will be a daunting challenge even if execution improves, Short wrote in her report.

Whole Foods obviously had the first-mover advantage, said Short in an interview. The reality is that everyone else has gotten to the game.

For one thing, she noted that Kroger, with more than 2,700 locations, has eclipsed Whole Foods in the organic market, selling $16 billion in 2016. Wall Streets consensus forecast for Whole Foods in the current fiscal year is $15.9 billion.

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Geography is another problem. More than half of Whole Foods stores are within five miles of a Kroger, according to data from RS Metrics cited by Short.

And its not just Kroger. Costco (COST), Sprouts Farmers Markets (SFM), Trader Joes and closely held chain regional grocery chains such as Wegmanns are also significant players in the natural and organic food markets, squeezing Whole Foods profit margins further, she said.

There is less and less differentiation, said Short, who rates the stock equalweight. Everyone who is getting in the game is at a lower price point than Whole Foods.... The retailers theyre losing traffic to are exceptionally good retailers.

Take Sprouts, which Bloomberg News reported last week was in preliminary talks to be bought by Albertsons, whose chains include Safeway, Acme and Vons. Wall Street analysts forecast sales for Phoenix-based Sprouts will surge more than 12 percent to $4.3 billion in 2017. Thats more than double the expected growth rate for Kroger, whose revenue is forecast to rise 4.9 percent to $120.9 billion and far better than the 1.3 percent gain expected at Whole Foods.

Investors have shown confidence in Sprout pushing its shares up more than 20 percent this year, compared with declines of 7 percent and 16 percent at Whole Foods and Kroger, respectively.

To be sure, Whole Foods isnt ignoringits many challenges, such as its six straight quarterly declines in same-store sales, a key retail metric measuring the performance at existing locations. The chain announced plans last year to slash $300 million in costs and has scrapped a goal to increase its store count to 1,200 locations, more than three times its current 462.

Critics of Whole Foods have mockingly called it Whole Paycheck for years. The grocer, which didnt return a request for comment for this story, has tried to live down its high-price reputation by arguing its groceries were worth the cost because their quality is better. Now, thought, Whole Foods is paying closer attention to prices. Last year it unveiled its 365 concept store designed to appeal to budget-conscious customers.

They have definitely made progress on their positioning from a price perspective, Short said. I would argue that the quality gap isnt as wide as the companys perception that it is. That would tell you that the companys price position is not sustainable.

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