Dropdown Menu and Subs Best Options

No, based on my first suggestion where you add additional columns, it would be something like this.

Category SubCategory-Category SubCategory ThirdCategory-SubCategory ThirdCategory
Arts & Collectibles Arts & Collectibles
Automotive Automotive Car & Truck Parts
Baby Automotive Motorcycle Parts
Books Automotive Wheels & Tires
Baby
Baby
Baby
Books
Books
Books

But in honestly, based on my second suggestion, I think this would be better since you wouldn’t have to add extra columns and you can use the ones you already have.

Category SubCategory ThirdCategory
Arts & Collectibles
Arts & Collectibles
Arts & Collectibles
Automotive Car & Truck Parts Carburator
Automotive Car & Truck Parts Engine
Automotive Car & Truck Parts Steering Wheel
Automotive Motorcycle Parts Clutch
Automotive Motorcycle Parts Forks
Automotive Motorcycle Parts Brakes
Automotive Wheels & Tires All-Season
Automotive Wheels & Tires Off-Road
Automotive Wheels & Tires Touring
Baby
Baby
Baby
Books
Books
Books