It might help to think of store categories as physical filing cabinets.
Sub-categories are the drawers, and individual products are the contents within the drawers.
If you're filing away a paper record in the real world, you have to choose one drawer for it, it can't possibly be in more than one physical location. Likewise on Zazzle. Your products can only be assigned to one category.
I believe that it is true that most shoppers are not going to be wandering around your store. They're going to happen on your product in the MP as they're browsing/searching Zazzle in general. In this case I am an advocate of devising a category structure in whatever way best helps you the store owner to stay organized. In such cases, only you the store owner knows how your mind works; what makes sense to you might make zero sense to someone else.
On the other hand, there are stores set-up for a very specific target market where the Creator plans to heavily self-promote their own store to that market. ["check out my store for everything of X theme you may need..."] In these cases, organizing for the shopper, not yourself, is of utmost importance. I feel from your posts that you fall into this category. So my advice is,
take a step back and approach your room full of filing cabinets as someone else. Pretend you have no idea what your shop offers or where you have it on the shelf; you're just a random customer who is wanting a primarily pink iPhone case. Would you first look in
Fashion --> Solid Color --> Phone Cases
or
Electronics --> Phone Cases --> iPhone --> Pink
These are just random made-up examples but the point is, if you are planning on directing people to your store and having them navigate it (rather than just landing on your products from keyword searching), then you need to set it up in a way that gives them the most direct and logical route to finding what they're looking for. What you can do takes a backseat to what you should do. In other words, we have the ability to create endless categories and subcategories based on product type or design or use-cases etc but the most important thing is, what's going to make it easiest for the shopper?
For me, I am inherently driven to over-organize & classify everything. This was a real problem when I started my Zazzling so I forced myself to just make very broad Categories loosely based on product type ["Things to Wear" or "Linen Closet" for example]. If people want to be more specific than that, that's what the actual Zazzle cat filters are for. Since they can already filter down by specific product type using the Zazzle structure, I feel like using our self-made categories to duplicate that is redundant. So since I am in the former group (relies on marketplace searching rather than direct self-promoting of store) I made categories for broad product types as that works for me and also gives the random person who might end up in my store a general sense of where things might be, and made Collections for specific design themes.
Your questions about categories are good ones but they are very subjective; there is no right/wrong way, what works for one may not work for another. It's hard deciding on an over-all shop structure. I actually think it may be the hardest thing when starting out here; it's so easy to get so lost in structuring that actually getting your products out there ends up perpetually delayed until everything is just right. Believe me, I get it! But at some point you have to make a decision about what will work best for your needs, stick to it, and just get your products out there.
