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I agree.  And that is the reason why it is better to spend your time improving your website than worrying  about a site above you that is impossible to understand.   It's possible that they earned those rankings.  It's possible that Google has incorrectly ranked them (which most often happens in low competition SERPs such as the ones here).

That's something you'd want to test with your users.  Generally though, the easier it is to get from Point A to Point B to Sale the better.

I'd go with www.mybrand.com/store/category1/subcateory www.mybrand.com/store/category2/subcateory www.mybrand.com/store/category3/subcateory ...this keeps everything neatly organized for both SEO and the UX (not to mention your content management). I've been building professional ecommerce websites for 12 years. Fred