Because it gives you a quick glance instantly why an order isn't processed already. Instead of going it over again you know what is the status it.
- Out of stock or 1 out of 8 out of stock
Maybe you have messaged the supplier to ask if they still have it, in my experience they sell it maybe 1 week later or can put it back online if you tell them you need to order it.
- Waiting for customer update
Maybe an item is not on stock in Aliexpress and you can't find it in a different store. So you can ask the customer if he/she want's a substitute. In my experience they don't check their spam/junk folder so often so after some time you got many orders still not processed.
Of course you can refund, but then they will email you certainly and ask "why you refund bla bla". I prefer to email them for a substitute rather than email and use my time to say "here is your money back, we can't deliver".
- Possible dispute
It happens to me sometimes that after manually review some orders it's most likely possible that scammers placing orders. I don't want to process these and I don't want my other colleagues to process them as well. if you label them you know what is wrong with this order. You can move it to the trash of course, but you still have received it funds from this customer. In my country you have to keep record of each transaction.
And any other labels I can think of right now which is useful to save time and be more productive.