Assign a Subcategory To a Category With Products Already Assigned To It.
How can I add a category to a category that already has products in it?
A category may not contain both products and subcategories. If you would like to add a subcategory you must first create the new category / categories and then change the primary category of the products in the parent category to these subcategories. Once there are no longer any products assigned to the parent category, you will then be able to add the subcategories to the parent category.