Yes I suppose it does but it doesn't take up masses of inventory space because as I said each class would have its own specific inventory for gear, so you would change class and have the gear for that class automatically equipped.
I guess you are a paticularly casual player then, most people equip gear based on their stats and what benefit it brings to their class not how it looks, granted there is a part of me that likes to wear cool looking equipment but I would much rather take the stat benefits over how i look.With how I described the system lets say you get a Body Armor from an NM that you really like but its not part of a set. You can go and find and mix and match pieces of crafted gear to get a matching oufit set together for that Body Piece. Thats what I love about FFXIV. I don't like looking tacky, I'm very fashion oriented when it comes to how my characters look which is one of the reasons I hated WoW so much. The boots in that game make me want to vomit.