There are three levels of classification available: Department, Category and Subcategory.

Department is typically considered the most general level of segmentation, in a clothing store categories can be Mens, Womens, Youth, Infant, Accessories etc. Category and Subcategories are the next levels.  Reports can be filtered by one or a combination of these classifications.

Creating a Department

You can also merge departments . 

Creating a Category

You can also merge categories

Creating a Sub-Category

You can also merge sub-categories