Revised:
Collections are for customers
A collection should answer a shopper’s question: what can I find here? Mixed stock tempts merchants to mirror suppliers or pallets, which means nothing to a customer. Start with a few main collections by theme or room and keep each one large enough to browse.
Subcollections as filters
Instead of dozens of tiny collections, keep main collections and add a subcollection field to each product. With Shopify Search & Discovery this field becomes a filter on the collection page, so a shopper can open Christmas and narrow it to decorations or lights. A product can stay in a main collection without a subcollection.
Search and all products
Collection pages only filter what is inside them. To let shoppers filter search results and the all-products page by collection too, store the main collection name as a product field as well and enable it as a filter. Keep the Shopify product category for Shopify’s own use, and build navigation on your collections.
Keep it in one place
Manage collections where the products are created, and let the system sync them to Shopify with their images. WareRushAI keeps main collections as Shopify collections, adds subcollection and collection fields for filters, and can bring renamed collections and images back from Shopify, so the structure does not drift between systems.