Category hierarchies in MS Dynamics AX 2012 Retail are used to group or categorize the retail products that are sold through retail channels. There are 4 retail hierarchies available out of box:

Retail product hierarchy – you can setup only one hierarchy of this type. Add all the products and categories in this hierarchy. It helps you in creating assortments and loyalty programs.

Supplemental retail hierarchies – you can setup as many hierarchies of this type as you want. For example, you can create specific hierarchy of this type for summer sale in your stores. It helps you in creating assortments and loyalty programs.

Retail channel navigation hierarchies – this hierarchy type is used only for online channels. Create this hierarchy to setup the category structure of products that you sell in online store. The navigation structure of products and categories as it appears on channel website is driven by this hierarchy.

Retail vendor product hierarchy – for certain products when you import product data from your vendor, use this hierarchy type.

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