When you need input for a project, there are lots of options from which to choose. True rotary input, however, can be difficult. Especially if you want a rotary input in a slim format like you might see on some sort of portable remote control or gaming interface.
A great option that you likely haven’t considered is this scroll wheel breakout from 3DStuff. The board breaks out signals from a slim control wheel, including the A and B signals from the encoder plus 5 switches that form the center-selectable directional pad. They’re available fully assembled or as just a PCB, and more info on the wheel itself is found here.
Of course, if you’d rather work with an encoder that does protrude noticeably from your cabinet, why not check out this device, featuring an I2C interface and RGB Lighting. Finally, if you’re wondering what type of rotary input to use, you can find more info in this Encoders Vs. Potentiometers post.