Custom post type and categories

I am currently working on an ecommerce site using the cart66 plugin. I’ve recently come across the custom post type functionality but am having trouble wrapping my head around it. Basically I want to create a custom post type for ‘products’. What I would like to do is categorize the products into categories/subcategories with the end goal being a permalink structure like /category/subcategory/product-name. Any help would be greatly appreciated.