I suggest a time after looting something or someone for your character to process what you told them to get from it such as unsheathing a sword from whoever they are looting and putting it in their own sheath or saving it for last because they don't have one, and then they carry the sword by hand. Armor would also have to be carried by hand or put on and worn, and depending on the size and how adjustable the pieces are(cloth shirt vs. metal armor), it could fit into a backpack. But there would be a time amount according to how many items your placing and how skilled your character is at placing each of the items. This time would be a vulnerability just like a medic has when healing someone but you can cancel placing items and tell your character to get their weapon out or go straight for a packed weapon. Your inventory would be a combination of all the slots your character could have on person. A sword cannot really physically fit into a backpack, you would need a space specialized for it. With backpacks the items at the top are the ones near the top of the backpack, your character will be spending more time taking things out from the top to change the location of something on the bottom, then put everything back in which would naturally fall to the lowest location depending on other items and whether or not they are breakable, bringing on another concept-->
I suggest the ability to break stuff either with a weapon or with gravity. When someone strikes an item such as a water canteen you are wearing which could impact the person, there would be a damage reduction for the canteen being in the way but it may also destroy part of your canteen and cause water to leak out of it. If a big animal were to charge into you and your character falls back, any items in your pockets may or may not fall out depending on how your falling and if any other objects in the pocket keep it from falling out as easily. If you stacked five iron bars onto a glass bottle of (whatever) it may break, especially from an outside force adding to weight. If you were to tell your character to throw out an item(they could set it down or throw it randomly on the ground) the item could break if they threw it depending on how fragile it was and the surface it fell on.
I suggest that big objects that cannot fit into inventory be carried with hands and maybe with thighs too or be transported by pack animals with certain straps, or by wagons (or something like that). If a character were to pick up a Barrel of water for a certain amount of time(obviously dependent on strength) and they tried to carry it up a hill and it got too steep to carry it, it would fall on them due to weight turning into a sideways force, toppling the character <-- or they could get it to their side so it rolls down the hill without hurting them. Other factors and features such as sand moving because it easily changes by force can cause loss of balance or someone to slip. If a cart pulled by a animal were to go up a slope the weight of what's being pulled plus the animal is going to start adding up the steeper it is and cause the animal to be slower and eventually give up, dragging the animal back with the cart of supplies (<-- possible injury, maybe). Carts may also get damaged like rolling one off a cliff.
I suggest more friction to the ground so people and items don't slide down a low slope without consideration for weight and whether or not something has a roundness like wheels or part of barrels.
I suggest animations for handling all the different kinds of items in picking them up putting them in, filling canteens, sheathing, and moving things around except unless there are two different filled barrels you would carry them the same, but depending on what fills it, one may be easier to carry because of weight.
For traders, your character can be seen taking things out of the separate inventories on the person putting them on the counter (and putting the things that were in the way back in) and the trader can be putting your things inside their storage (<--which realistically fits in there) and taking out the things you bought, putting them on the counter for your character to put in where you wanted it. The traders should be buying your items to sell them to other customers and be able to make a profit. There should be an economy based on imports and exports transported from actual places getting the materials and resources such as a mine or a weapon smith.
I also suggest that the hand slots be able to hold things like how a person carries a long pole with both hands or holds a pile of coins better with two hands with the opportunity to drop some, and having to carry iron bars in a stack maybe two to four at a time with their hands and other items within reasonable means able to be seen on person.