• by Sarah Mahoney  @mahoney_sarah, October 2, 2008

Just days after Wal-Mart Stores announced it would open its Christmas stores early, lowering prices on the hottest toys, KB Toy Stores and Target have made similar cuts, a sign that this holiday season may turn into a price-slashing slugfest.

And retailers seem keenly aware that while last year's toy-selling season was overshadowed by safety concerns and extensive recalls, this season's dire economic fears will create a demand for cheap gifts.

Target's announcement virtually mimics Wal-Mart's, promising lower prices and plenty of great picks for $10 or less. And KB Toys, the largest mall-based toy store in the U.S., is lowering its prices on more than 200 items to take them below that $10 mark. "Clearly, more consumers are looking for affordably priced gifts," the Pittsfield, Mass.-based company says in its release.

Many retailers are already struggling, and some industry experts have predicted that the coming holiday season will be the worst in nearly two decades. And while extensive price-cutting and freebies can only put more pressure on store profits, it's still one of the primary methods that stores have for tempting shoppers. Kmart, for example, owned by Sears, is already offering free shipping on toy orders of $79 or more. And perhaps a more chilling sign? With Halloween still weeks away, it's offering 15% off all purchases from its Totally Ghoul departments.

While not all retailers are changing their holiday toy promotions schedules--market leader Toys R Us, for example, released its "Hot toy" list late last month, right on schedule--some believe that extending the shopping season will make it easier for consumers to spend.

Wal-Mart, for example, says it based its decision on a survey, which found that 35% of consumers plan to start their Christmas shopping earlier this year to help stretch holiday dollars. Interestingly, 61% of its survey respondents say they won't make any spending cutbacks. The rest plan to cut back by $50 or less. Other money-saving strategies include buying lower-ticket items (39%) or presents for fewer people (35%.)