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You can only merge accounts, customers, and vendors. That's why you're getting an unexpected error when performing this process on your inventory items.
Please refer to this article for additional information: How to merge accounts, customers, and vendors. It will guide you through the process of merging the information I've mentioned above.
There's a feature where you can group your products and services in QuickBooks Online. Simply categorize them to keep things organized.
Let me show you how:
I've added this link for more details: Group your products and services into different categories. This article will tell you more about grouping your products and services.
Keep me posted if there's anything else you need about the process above. I'm always around to help you out.