To correct the below error message you need to enter your Etsy categories.

To enter your Etsy categories , please edit the Etsy listing.

You can do this from your Inventory

Inventory-> Inventory & Listings->

Select the product description-> select the listings tab-> edit your Etsy listing-> enter the Etsy category

or

Inventory-> inventory & Listings->Manage listings-> draft listings tab-> Click on the product title-> enter the Etsy Category