1. Go to Categories under Products on the left side, then click on +New Product Category.
2. Then you will see the page below. If you want to create a top-level category, leave the Parent field blank, but if you want to create a sub-category, you have to choose the parent category from the drop down. Once done, click on Save.
Once you have created the Categories, you will have the ability to edit an existing product or add a new one under a category by choosing one of the categories from the drop down.
You may also use the Categories in creating rules for Pricing Adjustments.
You may also add a category for Variants.