What happens, I believe, is that --relocatable prepends some code to all files in <venv>/bin to run activate_this.py, which in turn changes sys.prefix (the grandparent directory of Python libraries, normally something like /usr) to point to the venv and saves the old value in sys.real_prefix. When you run activate and then you run pip, this code is called twice, and the second time sys.real_prefix is overwritten with the old value of sys.prefix which at this point is also the venv. This will then fail the assertion in pip which verifies that real_prefix points to the system-wide Python installation.
Workaround is to run pip from the interpreter, without invoking the executable: python -c "import pip; pip.main(['install', 'flask'])" (Running <venv>/bin/pip while the venv is not activated would probably work as well.)
