That’s because you’re NOT adding the newly created Item to the newly created Product You’re adding it to the Parent Group’s Product instead:
I’ve got no idea what the Parent Group’s Product is - but it’s certainly NOT the newly created product from step 1 (how could it be)?
By the look of your database screenshot, there is no parent group’s product (it’s empty) so you’re not adding the newly created Item to anything.
To do what you’re trying to do, you need to add the newly created Item (the result of Step 2) to the newly created Product (the result of Step 1) - so just change the ‘Thing to change’ to the result of step 1.
Also, why are you setting ALL the fields apart from the Item List to ‘empty’ on the new Product (after having set them initially in step 1)?
I’m guessing that’s not your intention, so make sure you remove those fields from the workflow action.