Riding the wave of consumer interest and awareness of healthy and organic foods Whole Foods, the up-market grocery chain, rapidly spread into middle and upper class neighborhoods around the country. Consumers with plenty of discretionary income to spend flocked to its stores and it soon earned itself the sobriquet Whole Paycheck, a phrase the companies executives would like to now remove from common parlance.

With the economy in the dumpster people are now reigning in on discretionary spending and to make matters worse for Whole Foods, consumer interest in organic food appears to be leveling off after several years of double-digit growth, according to the Hartman Group, a market research firm specializing in health and wellness. [Found on NYT]

With Whole Foods stock off 70% since 2006 is this a company that has stumbled like another former leader in the discretionary spending market, Starbucks? The cost of fuel and the high rise in food prices are definitely hurting the consumers pocketbook now they are turning their backs on high-priced grocery chains like Whole Foods.

This is not to say that consumers who are heavily committed to organic foods and are happy to pay a premium for them will stop buying organic. More likely it’s those customers who were attracted to the “idea” of organic, pulled in by savvy marketing from companies who never used the term organic to describe their produce, who will steer away from high-priced organic foods and go back to regular produce at cheaper grocery chains. As everyone jumped on the organic band wagon sales soared but now it is consumers economic woes that are dictating where their groceries monies will be spent. The trend appears to be that meat, produce and dairy that is organic continues to sell but products such as breakfast bars or cereals and other similar food categories labeled organic are now less important to shoppers.

Whole Foods problems do appear to mirror those of Starbucks‘ - they were both once Wall Street darlings whose stocks soared for years, but with aggressive strategies for expansion by building more stores rapidly both chains were unable to maintain their margins and Wall Street punished them. They also relied heavily on customers paying a premium for what they saw as a premium product and that only works in times of prosperity not in an economic downturn.

There is also the hyper-local aspect of consumer habits these days. Farmers Markets and even cooperative shares in small organic farms are becoming very popular these days. These markets and farms offer consumers access to locally grown organic produce at the right price and also the feelgood aspect of supporting their local communities. Think local, eat local may be a phrase that becomes popular but it won’t help a national chain like Whole Foods. Whole Paycheck may very well haunt them and their shareholders.

Related Post: Starbucks Fires Head of Entertainment Division

A slumping economy has caught much of the apparel industry off guard and faltering under an increasingly volitile wave that can be attributed to the deflation of pricing on mainstream American labels, increased manufacturing costs and savvier consumers who are putting more thought into their purchases.

While the price of gas, utilities and groceries has skyrocketed, discretionary (non-essential) spending has been hit hard. “Fast fashion” retailers have fared okay so far in this lackluster market, but eventually, something has got to give.

Many of the staples in mainstream American apparel (Levi’s jeans, Lacoste polos) have actually decreased in price, even when adjusted for inflation due in part to the trend of moving manufacturing to countries with cheaper labor costs. But with the dollar losing steam, those rates have jumped. “As far as bottom costs go, we’re there. I think we’ve exploited all the countries on earth for people who really want to work for nothing,” said Bud Konheim, the chief executive office of Nicole Miller (NYTimes.com).

In many social circles, it is now hip to focus on individuality with regards to fashion and making thoughtful purchases. Instead of purchasing a gaudy, logo-driven article that is instantly recognizable (and quickly dated), people are leaning towards rare, more unique items. “Everything we pick up today has to pass a test,” said Candace Corlett, the president of WSL Strategic Retail, a consulting group. And, with so many options nowadays, who can blame consumers for taking their time to make a purchase? Unfortunately, the NY Times mentions that this is causing many fashion executives to feel the pressure on their bottom lines. Bud Konheim laments that “We as a business cannot afford to have a customer take a second look and ask, ‘Do I need this?’ That is the kiss of death. We’re finished, because nobody really needs anything we make as a total industry.”

Not everyone is faring badly in the tough American economy. Tom Wallace, President of trend forecasting company Label Networks lists a handful of brands including American Apparel, H&M and Uniqlo that are weathering the storm surprisingly well. This may be because of their ability to deliver consistently on-trend clothing in basic shapes at reasonable prices that are easily mixed in with what consumers already own.

To be fair, the recession isn’t hitting everyone. The International Herald Tribune says that “While American buyers are keeping an uncharacteristically low profile, with a beady eye on the miserable dollar exchange rate, other parts of the world are rejoicing in burgeoning markets and have no thought of recession.”

To cope with the lagging economy, luxury fashion houses are surviving the downturn by pushing accessories including jewelry, shoes and handbags more heavily. While shoppers might pass up high priced trendy clothing, they will still drop money on items they can use regularly.

As the U.S. recession deepens, it will be interesting to see what creative tactics brands will employ to stay relevant when consumers are more concerned with basic needs. With rock bottom prices already the norm in the nation’s collective consciousness, the sinking of many labels will be inevitable.