Product Categories Inclusive?

-- url of the page with the problem -- : www.litterpicks.com
-- HikaShop version -- : 3.2.2
-- Joomla version -- : 3.8.4

We are having one issue with a category filter that we've created. We have product categories, subcategories, and products within those subcategories. Here is an example our category layout:

We have created category product listings from our main menu. One menu item lists products from all the dog categories and then there are other menu links to product listings just within each dog category (ex Hounds or Terriers). They work fine and the correct products are shown.

On each of the product listings pages, we have a category filter. For example, on the Hounds page we have a single dropdown filter to select either Basset hounds or Coon hounds. And the same on the Terrier listings page--we have a filter for Boston Terrier or Russell terrier. These work great!

Here's our issue: on the page that lists all the products from all of our categories, we have created a single dropdown category filter for our top level categories --Hounds, Terriers, etc. Our filter is created the same as the other (except the category chosen on the filter is "All Dogs" and "Include Subcategories" is selected. It shows up fine on the product listings page with our six main categories on a single dropdown. All good so far...

BUT, when a category is selected from the filter, it says there are no products within that category. For example if "Hound" is chosen, it says there are no products in that category, even though they are products in the subcategories called "Basset Hound" or "Coon Hound".

Is that how it is supposed to work? Seems like if a product belongs to a subcategory, it should also belong to the parent category and be shown when filtered for that parent category. If we go back to the product editing page on the back end and put the product in BOTH the "Hound" category and the "Basset Hound" category, then it shows up on the filter. We just assumed if it belongs to the "Basset hound' category it should belong to parent "hound' one as well.

Are we missing something here?

OK makes sense. Perhaps in the future there would be a way to filter within categories/subcategories. The issue we have with the 1st level category module is that it doesn't dynamically change any content on the page. So until the shopper finds the specific category they want and click on it, nothing on the page changes--so you can't narrow down the products to a particular category if there are subcategories below it.

But we'll figure something out.

One more category question--of what benefit is there to have vendor categories created in Hikamarket? It doesn't appear there are ways to sort/filter these categories so we are wondering if we should keep that option. Seems like just more categories for a vendor to select from when creating a product and assigning it to a product category. Or would there be some reason why a vendor should assign a product to a particular product category and their vendor category?