I'm sure it's possible, but the formatting of your example makes it very difficult for me to figure out exactly what you want. Consider using the HTML Maker in my signature to make future examples to read.
Which of the 3 examples below is most like what you want?
| A | B | C | D | E | F | G | H | I | J | K | L |
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Book Fiction | Book Fiction | Book | Book | Fiction | Book | Book | Type/Item | Unique Types | Book | | | |
Book Horror | Book Horror | Fiction | Book | Horror | Toy | Fiction | Book Fiction | Book | Fiction | | | |
Toy Game | Horror | Farm | Horror | Book Horror | Toy | Horror | | | | | | |
Farm Cow | Autobiography | Autobiography | Farm | Autobiography | | | | | | | | |
Toy Game | Book Autobiography | Toy | Game | | | | | | | | | |
Farm Cow | Toy Actionman | Farm | Cow | Toy Game | | | | | | | | |
| | Farm Cow | | | | | | | | | | |
Book Autobiography | Book | Autobiography | | | | | | | | | | |
Toy Actionman | Toy | Actionman | Book Autobiography | | | | | | | | | |
Toy Actionman | | | | | | | | | | | | |
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Sheet4
The A:C example has a list of your items in A, the B column has a unique list of the items, C1 would have a dropdown containing Book,Toy,Farm, and the C2:C4 list would list the items that start with what's in C1. How you generate the list in C1 is undetermined at this point.
Example 2 has the category in column E and the specific item in column F. We use the unique formula in column G to get a list of categories. H1 uses that list in the dropdown. Then H2 lists the individual items starting with H1.
Example 3 has the combined category/item list like example 1. I use a somewhat different unique formula in K2:K4 to get a list of categories, by which I mean, the first word of each cell in J2:J10. The headers in J1:K1 would be required in this case. Then the L1 dropdown uses the K2:K4 list as a source, and the L2:L4 list is generated like example 2.