Offering merchandise is a great to build a stronger brand, get people to acknowledge you more, remind them of you, and get people talking about you in real life. It also builds a stronger sense of unity among your fans, and make you more prone to last and become iconic. Decades later people are still rocking merchandise from bands in the 80s just because they look good.
The merchandise can be sold, used in competitions or giveaways. Last but not least, its a great source of income for you.