Your gear slots are full. Complete Merlin Trial Challenges to increase your gear slot capacity or sell excess gear at vendors.
Destroy Gear
If you are in a dungeon and can't get to a vendor at this time,
1. Open menu then go to the Gears.
2. Destroy the extra useless gears you have.
Sell Gear for Gold
All vendors will buy your gears and they pay good money for them.
Increase Gear Slots with Merlin Trials
The Merlin Trials in Challenges menu can increase the number of gears you can have in your Gears.
Don't Worry About Transmog
You can still transmog your destroyed or sold gears in Gears menu, so don't worry about losing them.