What is a Product Group?
A product group is a subset of your inventory. As an advertiser you can group the products that fall under the same category, or of the same brand or any with any other similarity into product groups. In Google Shopping, advertisers bid on product groups. (Advertisers bid on keywords in search campaigns). All the products in a product group use the same bid as the product group.
Getting started with Product Groups –
When you create your first shopping campaign, Google clubs all your products from your product feed into a single product group by default. You will have to break the products down into different product groups. Grouping products into a product group are recommended as it helps in bidding specifically to meet the best of your advertising goals. You can further subdivide a product group into smaller fragments. Advertisers can create product groups based on product attributes like category, product type, brand, condition, item ID and custom label.
To sum up –
A product group is basically a subset of your inventory of products. One can create product groups based on condition, category, product type, brand, ID, and labels. Product group acts as a keyword for Google Shopping. Advertisers do all the bidding and optimization at product group level.
This is a basic article to inform about product groups in Google Shopping. An ideal way to structure your campaigns is to use single product ad groups.