I like item tiers when I'm playing. Variety in types of weapons is good: some swords being better at parrying, others at pure damage, others with critical hits, but I want to know when I'm playing that there's better stuff out there, waiting for me to find it. I think I'd get bored pretty quickly with a game that didn't include some sort of item progression (at least for 'standard' combat based RPG's).
Power progression in pure stats VS Battle Option progression.
For Stat Progression, it usually is good to expand the wealth of stats you receive by utilizing the limited equipment slots. Let's say that you can only equip a weapon, armor and accessory to make this simple. The first shop only offers these items:
Short Sword +20 ATK
Leather Armor + 10 DEF
Bronze Ring +50 HP
For Stat Progression to work properly, the next shop should sell these items:
Long Sword +20 ATK +15% critical hit
Hammer +20 ATK +15% Stun chance
Iron Armor +50 DEF
Silver Armor +25 Def +25 MDEF
Iron Ring +200 HP
Silver Ring +100 HP +20 MDEF
The idea here is that the player is shown a lot better equipment than he has, however he now has to make a choice. Only one weapon can be equipped, so... Better damage with Critical Chance? Or maybe stunning enemies? Your itemization becomes non-linear, despite the fact your stats get higher with each shop. You can grant extra customization to characters this way by introducing different stats on similar powered items.
Battle Option progression on the other hand introduces no stat changes, but only extra combat options. Let's say I introduce 3 new items - one grants the Heal Spell, one grants AoE Non-Elemental Damage Spell and the third one grants a buff that recovers 25% of the party MP upon use in battle. This type is great when you want to add depth to a game, however you do not wish for players to grind in order to gain an advantage in battle.
Both options are of course best when combined. That's why characters "Learn skills as they level up" to have the Battle Option progression, while items get better and receive unique effects.
One MAJOR tip I have to add here however -> Be sure the player receives all possible combat options not later than 60% into the game. Otherwise players might get "that one cool skill, that is totally useless since only the last battle is left and the Boss is immune to it". When 60% into the game, leave only stat progression. That way receiving a powerful sword makes sense cause you want the best gear for the final fight. And the player will not feel like he wanted this thing sooner, cause "obviously, such sick stats should be this late in the game".
Thanks for all the tips! I do have one question: I thought money sinks were frowned upon, kind of? I've been frequenting gaming sites for a number of years and I often hear people complain about them. How would I handle that tactfully without pissing off the players?
This is debatable since, depending on the game, a money sink is either used to balance economy in a game or to screw players over.
Let's say I would add durability into equips that drops as they are used in battle. Repairs can only be done in towns or if you have the right item and both are not cheap. This has no function for the player - its only a hindrance since he cannot grind without coming back now and then and fixing his gear.
However, imagine using durability with items that have skills. Let's say that durability of the weapon never drops in normal usage, however if you use the skill it bestows (which has no MP cost) the durability drops. This is also a money sink, however the player now treats it as a buff. "The weapon just has its own MP" - the player will think, and treat it as an extra resource in combat instead of a hindrance. And since all party members can equip it, he now can customize the party by giving this extra move to anyone, since it runs on its own resource.
In both cases you drain away the player money. However one is an arbitrary limiter, while the other is a gameplay feature. I suggest developing money sinks with the mindset of "Does this enhance the gameplay?".
I could speak more about this issue, but its hard to do so in a void. Perhaps you can name a game and what is the money sink that infuriates the players - then I could give some proper answers as to why the game designers did that.