Introduction The retail environment, which is offering special experience to consumers based on customized consumer lifestyle, creates customer value from voluntary customer engagement. In recent study, it is shown that customer engagement is becoming an important factor which determines the characteristics of customer behavior in the retail and hospitality industries. However, the study of customer engagement has mainly focused on its performance in marketing field ( Hapsari, Clemes, and Dean, 2017; Kumar and Pansari, 2016) and most researches have handled the concept of customer engagement from the perspective of online environment(Shin and Byun, 2016; Jeon, 2016). Theoretical Development This study aims to investigate the psychological motivation for customer engagement and to examine the underlying factors of customer behavior in offline retail environment based on experience economy theory and Self-Determination Theory(SDT). First, this study investigates the relationship between perceived psychological benefits (autonomy, competence, and relatedness) and intrinsic motivation. Also, this study tried to analyze the relationship between intrinsic motivation and customer engagement (conscious participation, enthusiasm, and social interaction). Second, we tried to examine the relationship between customer engagement and customer creation value (functional value, hedonic value, and social value). Thirdly, we suggested the effect of customer creation value on customer purchasing behavior (shopping memories, customer satisfaction, word-of-mouth, and revisit intention). In addition, we attempted to find the mediating effect of the hedonic value between customer engagement and shopping memories; customer engagement and customer satisfaction. Futhermore, we investigated the mediating effect of shopping experience between hedonic value and customer satisfaction. Finally, We discussed the managerial implication for differentiated competitive advantage in the experience-based retail environment. Research Design and Model Testing To test the research hypotheses and our research model, we conducted questionnaire survey from the respondents who have ever been to the major experience-based shopping malls within 6 months. Through the confirmatory factor analysis, reliability and validity of the study constructs were verified. By using the structural equation model, research hypotheses were tested and most research hypotheses were statistically significant and accepted. The final research model also showed the statistical significance with the goodness-of-fit indices. Result and Conclusion As shown in the results of this study, the experience-based retail environment leads to higher customer engagement and increase the customer’s hedonic value and reinforce positive shopping memories. Specifically, the experience-based retail environment is offering psychological benefits and customers enjoy experience itself. During the shopping experience, the customers are motivated for customer engagement. The managerial implications of the study results for the corporate managers in the retail and/or hospitality industries were also discussed.