Having local players that play in games increases merchandise sales. Having star players be on your team for a long time (i.e. you are not buying and selling a lot of players and you don't constantly put your star players up for sale) can also increase merchandise. Having players on the National Team can also increase merchandise.
However, merchandise revenue isn't that much generally and not overly important, there are much better ways to get money like the Cup and attendance from your Arena.