Note: if following using the generate categories option results in 20 pages of categories, you've reached the maximum number of categories that can be generated. Please read this "smart categorization" guide before filling in the generated categories.
To add categories to your products, navigate to the Channels tab and click the Categories tab for the desired channel.
1) Categories page
When you are on the Categories tab you will see two buttons on the bottom left side. One is 'Add category' and the second 'Generate categories'.
2) Generating categories
Click on the 'Generate categories' button. The following will appear:
You can use the drop-down under 'Use field' to select the field you want to use to generate your categories. Most convenient is to use the most specific categorization provided in your master feed or from your platform. After selecting the correct field, click 'Generate'.
3) Allocating 'category (internal)'
After generating your categories you will find an if 'field' contains 'value' rule. What you can do here is filter on the value of a field, for example: if 'categories' contains 'shoe' then assign category (internal) 'Apparel & Accessories > Shoes'. This will assign this category to all products that match this filter. You will need at least three letters to make the drop-down to appear to select a suitable/matching category (internal).
4) Check your categorization
Don't forget to click 'Save categories', if you don't: all will be lost. When you have saved the changes, on the right hand side of the screen the percentage of items allocated to a category will appear, as well as the number of items set to categories and the number of items not yet set to categories. To see which items have not yet been set to categories click 'Without categories' and they will appear in a new screen. Eventually - in the best possible way - you would like to see your categories at a 100%.
5) Completing your categorization
You have categorized your products by using the 'Generate categories' option but have not reached a 100% status yet? You will need to add separate rules to complete your categorization. You can find how to do so here.