Welcome to the Q&A Forum

I would go with the first choice, or even something like domain.com/category/product (you could always include the brand in the SEO-friendly URL). The only situation where I would use the second option would be if I had a really tiny site, say 50 products or less. I would do it more from a future-proofing viewpoint than any specific SEO reason. With choice #1, if you ever move or replatform your site, it will be far easier to keep your products organized and to implement any necessary 301-redirects than if you choose options #2. It will also be far easier to sort these URLs in a database and then populate new categories on a new site. I suppose I prefer #1 because it makes managing the data easier, particularly on large sites.