At this time there isn't a drop-down type of scenario that can be created easily with PayPal widgets. But what you can do to have separate categories of your store, is create subpages and then put a PayPal widget on each subpage.
For more information on how to create subpages, please click here.
We have a tutorial that explains how to create an online store using PayPal widgets: Setting up the PayPal e-commerce Widgets
This feature is available only to those who have signed up before December 17, 2016.
If you want a more comprehensive store that includes categories, please have a look at Online Store: Categories and multiple stores.