Collections are just some sort of tags you attach to a book. It's definitely not like folders in a filebrowser like windows explorer. I transfer my files the same way you do. I move them directly with explorer from the PC to the reader. Then I open the Library program on the PC. Click on the "Reader" in the left pane and you should see in the library's main window the content of your reader. Now go to the left bottom corner. There's a "+". Press it and a new label within the reader section in the left pane opens. Name it to your likes. After that, just drag and drop a book from the files shown (in the main window) to your newly created label. Once the reader is disconnected, the files will show up under collections, too. But be carefull. If you drag and drop one single file multiple times to the same collection, the file/book will show up multiple times within the collections.
By the way, you can put books in any folder on the reader. On startup, the reader scans all folders for books. I've arranged all my book-files in seperate folders within the reader to actually reflect the collections.
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