DEEPER DIVES: Why Relay Technologies Investors Will Lose Everything

Good Morning,

First, as always, thank you for joining.

I’ve never written about anything with this much depth.

This edition is a REALLY deep dive into Relay Technologies. They hit the news hard last week.

This is my take. It’s the only place I’m writing about it.

Here’s what this issue brings:

• Relay Technologies raised big. I congratulate them for their hard work. But I don’t think it helps the industry or solves a problem. I go DEEP to explain why.
  

• Shocking news out of the US that seems to implicate a pretty well known eCommerce delivery company. Is this how packages get delivered for less than $2 each?

Relay Has Raised Almost $50M But Doesn’t Change Anything About Delivery

You might have seen the news last week about Relay Technologies.

The startup, has raised $35 million in Series A funding after its initial $10M seed round a couple of years ago.

Relay’s missing is to “revolutionize last-mile e-commerce logistics” … which startup isn’t saying this these days?!?

Like most newcomers to the space, they are betting the farm on data, AI and software.

Jonathan Jenssen, Relay’s CEO, has even gone so far to make this bold statement:

Billions of dollars have already been invested and lost over the last 5 years into companies that believed this exact same thing.

That logistics is an app.

Every one of those companies has either collapsed or has had to dramatically refocus on daily operations, execution and efficiency.

Their math didn’t math.

In this article I’m going to explain why I believe that Relay is over-hyped. I’ll highlight the challenges of their model and also add insight as to why these types of models have seen success in markets like China and India but will most likely fail in most other parts of the world.

Disclosure: I met Jonathan about a year ago. He was gracious to accept a meeting invite. I personally found him to be interesting and he understood last mile logistics (he had worked at Stuart previously). The Relay technology/platform is also beautiful - and very well designed (so much so that I asked him if they would be open to licencing it for another project I was working on - they declined). The goal of this article is not to put down any Relay employees, their technology or downplay any success they have had. It is to remove the buzzwords and fluff that is plaguing logistics and to shine a light on basic solutions wrap up in a revolutionary bow. Over-hyped solutions or solutions that fail to deliver only make logistics harder for every other retail and service provider who is tired of the same grandiose promises and losing millions of dollars hoping it’s true.

How Does Relay Work?

Relay will pick-up shipments from retailer warehouses.

From there, bulk shipments are brought to one of Relay’s sortation centers.

At these sortation centers, packages are sorted into bags based on the planned delivery person / route.

With route bags prepared, Relay moves these bags into the local community (their micro-hubs).

Gigwork delivery people will then go to their designated micro-hub, pick-up the pre-prepared bags, and then execute the last mile delivery.

That’s it.

That’s the network.

As you can see, from a core functional perspective, they don’t do anything really different from any other last mile activity.

Traditional capacitized last mile providers handle packages in a similar fashion. The difference of course being the added step that Relay has injected by adding local micro-hubs prior to the last mile delivery person taking control of the package.

Normally you would have many drivers all concentrated at home major warehouse, where each one of these drivers would then “load and go” with their deliveries for the day.

Relay adds a type of “middle mile” component to the activity by bulk loading fewer trucks who then each make multiple stops dropping off product to their network of micro-hubs.

Pros And Cons

I’ve done a lot of work in this space. Even though the models are very similar, there are pros and cons to how Relay is specifically doing things when compared to a traditional model.

(I am going to leave out the obvious points related to gigwork vs employees - those types of ‘benefits’ are a cornerstone of any platform using crowd-sourced labour or who pitches themselves as ‘asset light’)

PROS

• By moving product closer to your end consumer, you can use more hours per shift for deliveries versus driving

• With many micro-hub pickup points, you can have more drivers starting simultaneously

• Potentially improve CO2 impact by being able to support smaller vehicles (e.g. scooters, ebikes, small EVs, etc)

• Ability to offer significantly reduced work shifts

CONS

• Higher costs associated to duplicating activities (e.g. sortation centers, middle mile movements)

• Routes built on estimated capacities (this happens in most gigwork models as a result of the wild amount of vehicle fragmentation)

• Wasted time ‘reloading’ at microhubs

• Significant challenges managing micro-hub partner businesses

• Driver no-show (about 15%-20% of gigwork drivers don’t show up for a confirmed shift in most models)

• No holding capacity

• Less sorting & preparation time (network wide)

• Highest value only in dense urban population bases

Biggest Challenges

There are two HUGE issues with the Relay model that should have scared investors.

First.

You are not Amazon.

You will never be Amazon.

Allowing any business to present itself to the market saying that their approach to the problem is ‘better than Amazon’ is beyond foolish.

Amazon has invested BILLIONS of dollars into infrastructure and proprietary technology. They have literally set the standard when it comes to eCommerce delivery and customer expectations.

There are strong business reasons why they have the model that they do and why they continue to invest so much money into it.

The traditional capacitized routing that Amazon does gives them a huge amount of control.

It provides them with known capacity constraints.

They have a clear path to what they can do, what they can’t do and what they need to build more of, in order to do in the future.

Amazon’s delivery DSPs are the most efficient and effective of ANY last mile service provider. No one does better than them with it comes to overall packages delivered and stops per hour.

Being able to provide an ‘Amazon-esque’ service on the outside is no where near being able to do it on the inside.

And by that I mean both at levels of quality/performance as well as cost.

Relay has doubled down in everything they publish about packages going out for next day delivery in any of the geographies that they cover.

While that probably seems like a slow offer compared to the same day P&D the co-founders were involved in at Stuart, it’s a pretty steep promise in the model that they have proposed.

Second, cost.

Why for the life of me anyone is still selling on being a low cost provider in the last mile space is beyond me.

High delivery promises and low prices is the worse combination you can possibly create.

In order to be successful with those conditions you need volume.

EXTREMELY high (and consistent) levels of volume.

You end up working for pennies on the dollar, but hope that you can do it enough times that at the end of the day, it all works out.

Here’s something I’ve posted about a number of times lately, but I’ll say it again.

IF YOU ATTRACT A CUSTOMER WITH A LOW COST OFFER, THAT IS WHAT THEY ARE BUYING. THEY WILL NEVER LOVE YOU ENOUGH FOR YOU TO DOUBLE YOUR RATES DOWN THE ROAD. IT’S NOT WHAT THEY SIGNED UP FOR.

Is Relay’s Delivery Promise Really That High?

Looking at how they describe the model, next day delivery might not seem like that big of a deal.

In some situations, it’s not that big of a promise - at least, geographically speaking.

But Relay’s model is way more sensitive to it.

Here’s why:

Since Relay picks up from their customer’s warehouses, it means that they have to wait for orders to be ready.

Every retailer leverages “speed” in the offer that they make to the customer. Because of this, they want to push order cut off times as far as possible.

Each retailer then has their own cut off time and their own inventory location (their own warehouse, 3PL partner, whatever).

These pickups all need to be scheduled.

They are higher volume since it’s a bulk shipment (think parcels in Gaylords).

Because of the higher volumes, shipping in gaylords/pallets and the need to create efficiency - these pickups should be done with a commercial vehicle.

Even if they are outsourced, each individual pickup from a retail partner and delivery to a Relay sortation center needs to be profitable for a contract carrier (or else, why would they do it).

These pickups will need to be scheduled and will happen every day irrespective of total volume.

Most retailer warehouses or 3PL operations would be doing their shipping out from 2pm to 6pm. Some will keep shipping later than this if they have a lot of volume or if they are trying to capture as much of the daily order volume as possible for the next day service.

From here, Relay then has to ingest all of these inbound shipments at their sortation centers.

Realistically they would probably have from 8pm to 4am to inbound every middle mile shipment, consolidate volume, sort to individual driver bags, reload middle mile trucks.

Since their driver shifts start at 9am, they have the time from when the sortation center has loaded out all of the driver bags to make every middle mile delivery run, where drivers have to do multi-stop runs loading bags into each community business/micro-hub.

The high level of activity in a short period of time while also needing to have micro-hubs loaded by 9AM (so they can meet that other statement on their website that 50% of the volume will be out of partner ‘pitstop’ businesses by noon) makes this a much harder promise to consistently execute on than it sounds.

But China Is Already Doing It

One of the big things that has been used to highlight Relay’s model is that it’s already being done in China.

And since it clearly has already been ‘solved’ there, it will work in the UK.

It’s true that this micro-hub strategy is a big part of Chinese eCommerce.

In urban China, it’s common to have 50–100 small delivery centers or stations in a single city to serve nearby neighborhoods. Packages arrive at these stations several times a day, not just once. Small vehicles – often electric tricycles or scooters – make multiple short trips between the larger depot and the micro-hubs daily, instead of one long route. Couriers can refill and deliver in waves, enabling same-day or even intra-day batch deliveries.

Here’s generally how the system works in China:

1. Line-Haul to Hub: Packages sorted for a neighborhood are transported to the local micro-hub (station or locker) instead of directly to each address.

2. Handoff at Microhub: A station operator scans in the items and notifies recipients (via text/app). Parcels are securely stored.

3. Final Delivery Options: The customer either picks up the package at the station (using an access code or ID) or requests delivery from the station to their home. That final leg might be done by a gig worker on foot/bike or by an autonomous carrier in some pilots​.

4. Multi-Try Efficiency: If the first attempt to hand off fails (e.g. customer not home), the package stays at the hub for later pickup – no wasted re-delivery trips as in traditional models.

Here’s the thing though.

The biggest networks in China that are doing this successfully are Cainiano and JD Logistics.

Here’s the thing. Cainiano is part of the Alibaba Group, and they benefit from Aliexpress, Tmall, Taobao, etc.

JD Logistics is the execution arm of JD.com.

Those two players alone are handling a massive portion of the logistics for about 50% of the eCommerce marketshare in China.

This alone should be a MASSIVE red flag for anyone looking to replicate a model that is being used in China elsewhere.

The shear number of packages that they handle and the overall size of the market is second to none.

China themselves represent about 45-48% of global eCommerce sales.

There is also a strong component of customer pickup and drop off in China. While Relay does mention foot traffic benefits for partner pitstops based on pickup and drop off activity, it is clearly not the core value proposition of the service.

Its technology is focused on customer delivery and using the micro-hubs as transfer points.

The reason that delivery + consumer PUDO is so important is because these types of stations require high daily levels of volume to actually survive.

A 2020 McKinsey report on last-mile logistics estimated that urban sortation centers require 2,500–3,500 parcels/day to cover fixed costs in high-density cities like Shanghai.

Cainiao achieves this by processing about 70% of Taobao/Tmall orders through its stations.

JD Logistics holds onto about 90% of the parcels that originate from JD.com’s marketplace.

What About Outside Of China

Using local business as package pick-up and drop off points is nothing new.

You have a host of platforms now that are supporting BOPA (buy online and pickup anywhere activity).

Of course Relay’s model is more unique has it’s a tighter network with more controls, but it’s also not new.

Passel for example was an Australian start-up that had a similar vision. They partnered with local businesses (cafés, pharmacies) and set them up as micro-hubs. In their model, retailers were the ones who shipped grouped parcels to cafés (for example) and the staff would sort the parcels into neighborhood clusters during off-peak hours. Customers could then collect orders from the café or pay for doorstep delivery.

Passel’s model started falling apart when businesses lost interest in handling parcels (for small fees) when foot traffic didn’t increase as promised. Parcels being a secondary revenue stream also got out of hand for most partners. Passel collapsed when 30% of its café partners quit after Black Friday surges overwhelmed their staff.

The reality was, there wasn’t enough benefit for the business partners.

Most growth in this sector is coming from parcel locket networks.

If you are going to move aggregated volume into neighborhoods, most providers are either setting up or partnering for use of automated lockers.

While not as convenient as home delivery, they do provide benefits when it comes to chain of custody and parcel security that are hard to beat in these types of hub and spoke delivery models.

55% of retailers in the UK now partner with lockers (e.g., InPost) or corner shops for PUDO activity. In cities like London, Amazon drivers often default to lockers or concierge desks for apartments if a recipient isn’t home.

In large cities, lockers/PUDO points handle 58% of deliveries, and are expected to grow to about75% by 2027 (per DHL projections).

Why I Don’t See Relay’s Model Being A Success

Relay Technologies has raised nearly $50 million with the promise of transforming last-mile logistics, but its model doesn’t fundamentally change how deliveries work.

Micro-hubs alone are not an innovation.

The most successful micro-hub models, such as those in China, operate at an extreme scale, backed by dominant e-commerce platforms. These networks process millions of parcels daily, allowing them to justify investments in local distribution nodes and justify the costs of replicating (over and over again) daily sortation and middle-mile logistics.

Relay does not have that advantage.

And they never will.

Working with individual retailers is hard.

They all have different priorities and their main focus is their sales and their customers.

Retailer A isn’t interested in making operational changes to support Retailer B.

In addition, Relay’s model will ALWAYS be limited. It doesn’t work well as population density drops off (unless you shift from ‘pitstop’ partners and start building your own micro-hubs).

The fewer businesses you have on board, the more than each one of them would have to take on. And if there’s one lesson to learn from Passel, no retailer is going to allow parcel handling to impact their core value proposition.

By having to stay in more densely populated areas (in order to spread volume effectively across your pitstop network), you force retailers to keep additional carriers as part of the mix, you are asking them to make changes to their operations in order segment out volume for your network, and by default are always leaving the door open for the nationals to take back that business.

Relay is positioning itself as a low-cost alternative with a next-day delivery promise. However, low-cost logistics providers can only succeed if they have:

• Extremely high and consistent volumes to justify the cost of daily operations

• Reliable and scalable middle-mile infrastructure to move goods from warehouse to micro-hub without inefficiencies

• A path to operational profitability that isn’t reliant on investor funding alone

Relay's cost structure suggests it will face margin compression—balancing gig worker payouts, micro-hub partner fees, middle-mile trucking, and sortation expenses.

These expenses add up quickly, and without scale, they will likely struggle to compete on price while maintaining profitability.

Early contracts from retailers (I believe) have been more secured on ESG initiatives than on the actual service itself.

The UK has implemented strong regulatory and industry-led mandates pushing retail businesses and logistics providers toward sustainable operations and carbon reduction.

The British Retail Consortium’s initiative commits retailers to net-zero supply chains by 2040 (10 years ahead of the national target). Major Relay clients like ASOS and THG (both mentioned as Relay customers) are likely signatories, requiring partners to meet strict emissions benchmarks.

In addition, 66% of UK consumers distrust brands lacking ESG commitments, and investors like Plural and Project A (part of Relay’s round) prioritize startups with measurable carbon-reduction strategies.

And while I fully support everything that makes our planet better off, all the ESG goals in the world will struggle to hold up to a model that can’t generate a profit.

Unfortunately, Relay is betting on software, but logistics is an execution game.

Relay is (now) a well-funded, ambitious startup, but its model does not fundamentally change logistics.

Instead, it complicates last-mile delivery without offering clear, sustainable advantages over traditional models.

While the technology is impressive, logistics is won through scale, efficiency, and execution—not just software.

Without a massive volume advantage, Relay will likely struggle to justify its cost structure, making its long-term viability questionable (at best).

Is This What Free Shipping Will Get To?

That’s the image inside a warehouse in Connecticut.

It was operating out of Rocky Hill. Police reported that the last mile delivery company UniUni had been operating out of the building.

The consensus from officers on scene were that people had been living here.

The local business owner stated that “mattresses were there for delivery drivers who had a hard time finding apartments, so they would sometimes sleep in the warehouse overnight for their morning deliveries”

While the investigation is ongoing and I make no personal statement on the situation, I do think it’s important for people within the industry to be aware of anything that is going on with any service provider.

Here is a link to the source story.

That’s it for this week. Thanks for being here.