Industry jargon , whatever the industry, often contracts words … its not expected that we should consider it a new word.
I was recently working in the bedding industry, and the big soft things you sleep on were “matts”.
In 1918 the German Dadaist Kurt Schwitters invented a kind of found-object collage art he called Merz (pronounced “merts”) from a fragment of found text (a scrap of newspaper, I think) that had contained the word Kommerz (commerce) in the first Merz piece he made. As a clipped derivation, “merch” invites comparison with Merz, although there’s probably no direct connection between them.
From the 1999 song American Pie by British ska band Catch-22:
“Merch guys and roadies around the world this is your time so grab your girl”
It’s clear from the context that this refers to merchandise sold on a tour.
A few other lyric hits starting in 2001, but really ramping up in 2004.
Some retail workers use “merch” as a verb, meaning “arrange (or rearrange) merchandise on a display.” So you could merch a table, merch an endcap, and so on.
Short for “merchandising.” You can see why it’d get shortened.
My GF, a former merch specialist, sometimes finds herself merching messed-up displays when she’s shopping.