Create Product Categories

Click on the Product Categories submenu button under Titles/Products:



Create your categories by selecting the "Add Category" button on the top right, then go back to each book and add them to the category, or categories, you want, and then click on Update Product:
 

Then, in Pages & Navigation, you can use the item to display the categories in a drop-down menu. This can be done by dragging the item underneath the menu item where you want the drop down, then save your changes.