Designing category structures works very intuitive in Commerce 365. Go to Content > Categories and you will see a screen like the one below. You always start with a so called Root Category. In this case that is Store 1 Root Category. This root category is what you will link to your store. The root level category will not be visible on the front-end. All categories directly under this root category will be your top level categories. 

By right clicking on a category you can add new child categories. And once created, you can drag and drop categories to reorganize the category tree. 

You can have multiple root categories. And in Magento each store can have its own category structure. So you could create one for your new store. Or you could start to design a new stucture, which at some point in time will replace a previous structure on an existing store. 

Select a (sub)category in the tree and click on Details to open the detail page. Here you can specify whether a category is actually included in the category menu. If not, it will be a hidden category. Or you could choose to deactive a category. In that case it will not only be hidden from the menu structure, it will simply not be available at all. 

Select a (sub)category in the tree and click on Items to see a list of all items in this category. And in this screen you can add / remove items as well. 

Set Root Category

To read about how to set a root category for a specific Magento store, click here.